|Posted on April 15, 2014 at 9:35 AM|
In a market, buyers and sellers come together to establish prices and quantities of goods and services. The law of supply consists of a direct relationship between price and quantity and the law of demand consists of an inverse relationship between price and quantity. When the supply and demand curves intersect, a market equilibrium is established. Assuming no externalities exists, the intersection of supply and demand is allocatively efficient.
The No Bull Review video below shows you how the laws of supply and demand work in a market.
AP Macroeconomics / AP Microeconomics Unit 1 Basic Economic Concepts