Supply, Demand, and Market Prices
Aligned to C3.D2.Eco.2 — C3 Framework for Social Studies State Standards.
What this lesson teaches
The law of demand says that, all else equal, buyers want more of a good as its price falls, while the law of supply says sellers offer more as the price rises. The market price settles at equilibrium, where the quantity buyers want to buy equals the quantity sellers want to sell. Shortages push prices up and surpluses push them down until the market clears.
Worked example
When a frost destroys much of an orange harvest, the supply of orange juice falls, and with demand unchanged the market price rises until the smaller quantity is sold.
Practice questions
- State the law of demand and the law of supply.
- Explain what happens to price when there is a shortage of a good.
- Analyze how a sudden drop in supply affects the equilibrium price and quantity of a product.
Watch the lesson
Every lesson comes with a video taught in English and Spanish — the same video the QR code in the printed workbook opens.
▶ Watch this lessonEn español
Oferta, demanda y precios de mercado
La ley de la demanda dice que, si todo lo demás se mantiene igual, los compradores quieren más de un bien cuando baja su precio, mientras que la ley de la oferta dice que los vendedores ofrecen más cuando el precio sube. El precio de mercado se fija en el equilibrio, donde la cantidad que los compradores quieren comprar iguala a la que los vendedores quieren vender. La escasez empuja los precios hacia arriba y el exceso los empuja hacia abajo hasta que el mercado se equilibra.
Ejemplo: Cuando una helada destruye gran parte de la cosecha de naranjas, la oferta de jugo de naranja baja y, con la demanda sin cambios, el precio de mercado sube hasta que se vende la cantidad menor.
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