Supply and demand is the foundational framework of microeconomics, describing how price and quantity reach equilibrium in competitive markets through the opposing forces of buyers and sellers. The law of demand states that consumers buy more as price falls; the law of supply states that producers offer more as price rises. Their intersection — the market-clearing equilibrium — is the unique price at which quantity supplied equals quantity demanded, leaving no unsatisfied buyer willing to pay the prevailing price and no seller willing to accept less.
The standard linear model uses Q_d = a − b·P for demand and Q_s = c + d·P for supply, yielding equilibrium price P* = (a−c)/(b+d) and quantity Q* = (a·d + b·c)/(b+d). Shifts in either curve — caused by income changes, production costs, taxes, subsidies, or technology improvements — produce comparative-static predictions: a rightward supply shift lowers equilibrium price and raises quantity, while a rightward demand shift raises both. These predictions are the core testable implications of competitive market theory.
This interactive model lets you adjust supply and demand parameters in real time and observe how the equilibrium point responds. You can simulate economic scenarios such as a production subsidy (shifting the supply curve right), a consumer tax (shifting demand left), a technological improvement that reduces production cost, or a consumer preference shift driven by advertising. The model shows how even complex policy interventions reduce to simple geometric operations on supply and demand curves.