There are several possible scenarios involving changes in supply and demand that people are supposed to memorize in AS Economics. For example, when Either Demand OR Supply Move on Their Own:

  • Rising Demand - Increase in Qty - Increase in Price
  • Falling Demand - Decrease in Qty - Decrease in Price

While price is pretty self explanatory in every situation, I have yet to fully understand what "Quantity" represents.

What does Quantity mean in these examples?

Does it mean "Equilibrium Quantity"? If so, can somebody please explain how the "Quantity Demanded" and "Quantity Supplied" are related to each other, and how the theory behind quantity as a whole relates to/ties in with each of the examples above?

  • $\begingroup$ I retracted my close vote, but it is a very poorely worded question. Copy-pasteing a homework/exam question will trigger people who try to clean this site from low effort questions. I try to edit, feel free to undo if you disagree. $\endgroup$
    – FooBar
    Jan 13 '16 at 16:09
  • $\begingroup$ Hey sorry, I'm new to how this site works, this was my first post, sorry if I broke any rules, just wanted to understand what I couldn't grasp about the theory behind how the changes in price and quantity were caused. I understand now that "quantity" here effectively means "amount consumed" $\endgroup$
    – Ghost
    Jan 16 '16 at 13:03

Each curve simply shows the amount of goods that producers would supply at given prices and how many units of goods consumers would demand at all the different prices. Let's say the price of wooden chairs would be 5 million Euros. Producers would want to supply a large quantity of wooden chairs, since they're so profitable. Consumers would likely demand very little though. However since no one suppliers want to sell more than people want to buy the price will have to change and will not stay there in equilibrium. We only have an equilibrium when all parties agree, otherwise transactions don't take place. That's one intuitive way of thinking about it if it helps you.

The quantity at which suppliers want to supply exactly as much as consumers demand and consumers want to demand exactly as much as suppliers want to supply is given by the intersection of the two graphs. In this case neither party is unhappy with the outcome (both agree on the quantity to buy and sell). This means we are in equilibrium (i.e. no one wnats to change behavior). That one point is the equilibrium quantity.

Note that consumers cannot buy more than producers are willing to sell and vice-versa. If that would be the case, then they would have to change somthing, which means we wouldn't be in equilibrium.

So in short:

  • The Demand curve shows the quantity demanded.

  • The Supply curve shows the quantity supplied.

  • For the two curves we have several not easily observed hypothetical quantites. One quantity for each possible price.

  • The intersection is the observed equilibrium quantity.

  • $\begingroup$ Hey guys, thanks for the response, I think I was a just a little confused about the exact theory behind how changes in supply and demand affected price and quantity. I think I now understand that changes in supply and demand relate to the market surplus or shortage that they in turn create. As I understand it, when there is excess demand, people consume more, creating a shortage and the people bidding against each other drive up the price. When there is weak demand, people consume less, and suppliers compete by reducing their price. $\endgroup$
    – Ghost
    Jan 16 '16 at 12:53
  • $\begingroup$ But I'm having still having difficulty with the supply part. I understand that excess supply causes suppliers to compete and reduce their price, causing people to consume more because goods are cheaper. But when supply is reduced, wouldn't people bid more because of goods being limited? I'm still a little confused =S I know quantity is meant to be reduced here. Could somebody please explain this last part? $\endgroup$
    – Ghost
    Jan 16 '16 at 13:07
  • $\begingroup$ I think you're confusing the curves and equilibrium. The Supply Curve has upward slope because the more expensive a good is the more suppliers want to supply. So along the curve, lower price means lower supply as it's not worth it to supply so much for that price. Reducing supply means shifting the supply curve backwards which cases in equilibrium goods to become more expensive like you described as they bid more. $\endgroup$
    – BB King
    Jan 18 '16 at 22:22

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