Question

outline the main determinants of quantity demanded and quantity supplied and explain how these interact to determine the market equilibrium.

Answer 1

Demand Determinants

Change in either of the following will increase or decrease the demand curve:

1. Tastes, preferences, and/or popularity

2. Number of buyers

3. Income of buyers 

4. Price of substitute good

 Supply Determinants

Changes either of the following will increase or decrease the supply curve:

1. Prices of resources/inputs/factors or raw materials

2. Technology

3. Taxes and Subsidies

4. Price expectations

The equilibrium price is the only price where the expectation of the consumer and producer agree, where the amount of the product consumers want to buy is equal to the amount producers want to sell. The mutual quantity is called the equilibrium quantity. At any other price, the quantity demanded does not equal the quantity supplied, so the market is not in equilibrium at that price.