Supply and Demand The supply and demand relates to the amount of goods/services that are willing to be bought or sold, and are represented through the supply and demand curves. Supply Curve – shows the amount of goods/services that a business is willing to supply at various prices Demand Curve – shows the amount of goods/services that customers are willing to buy at various prices Equilibrium Price – where the supply and demand curves intersect, the ideal selling price since it avoids surpluses and shortages The supply and demand curves are constantly shifting. The supply curve is influenced by the cost of inputs, available technology, profits of other goods, the number of sellers in a market, the expectations associated with the good/service. The demand curve is influenced by buyer preferences, income, prices of substitutes, consumer expectations, and the number of potential consumers. Whenever these influences cause a shift in the curves it causes the equilibrium price to change. Shifts in the demand curve cause the equilibrium price and equilibrium quantity to move in the same direction, while shifts in the supply curve cause the equilibrium price and equilibrium quantity to move inversely. When a price is used that is not the equilibrium price then a shortage or surplus occurs. A shortage is when a business is willing to sell fewer products than are demanded. A surplus is when a business is willing is sell more products that are being demanded. A shortage means that more products could be sold and more revenue could be generated for the business, not maximizing revenue is a negative for a business. A surplus means that products cannot be sold at the price listed and will make the products sell for a reduced price in order to sell decreasing the profits for a business which is a negative.