1. Price Effects of Supply and Demand
**Once the Laws of Supply and
Demand are set into motion in a
free market economy, they will
affect prices.

2. Surplus - - leftover output (supply)
resulting from too much production
and too little demand at a given price.
Surplus
D S

3. Shortage - -condition resulting when
the quantity supplied is less than
the quantity demanded.
D S
Shortage

4. Equilibrium Price - - price at which
quantity offered for sale (supplied)
is equal to the quantity people are
willing and able to buy (demanded).
D S
Equilibrium