2.4 The interaction of demand and supply

In this chapter you will learn how to:

• define the meaning of equilibrium and disequilibrium in a market
• explain the effects of shifts in demand and supply curves on equilibrium price and quantity
• explain the relationships between different markets, including: joint demand (complements); alternative demand (substitutes); derived demand; joint supply
• analyse the functions of price in resource allocation; signalling (transmission of preferences) and the provision of incentives.