Explain in your own words the laws of supply and demand. Also include an explanation as to what caus

The law of supply and demand explains how prices are set for the sale of goods. The process starts with consumers demanding goods. When the demand is high, producers can charge high prices for the goods. The prospect of earning large profits from high prices motivates producers to manufacture goods to meet the demand.

What will make the supply line shift?

A shift is caused by rises and drops in cost. If the costs fall, more can be produced, and the supply curve will shift to the right. If the cost rises, less can be produced, this will shift the supply curve to the left. Changes in weather, taxes, and subsidies will shift the supply curve to the left or right.

What will make the demand line shift?

Demand can decrease (causing a shift to the left of the demand curve) for a number of reasons:

• Fall in income,
• Fall in the price of a substitute and,
• Rise in the price of a complement

The basic laws of supply and demand are:

• When demand increases and supply remains unchanged, then it leads to higher equilibrium price and higher quantity.
• When demand decreases and supply remains unchanged, then it leads to lower equilibrium price and lower quantity.

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