Editing Capitalism (section)

== Supply and demand ==
{{Main|Supply and demand}}
[[File:Supply-and-demand.svg|thumb|upright=1.15|The economic model of supply and demand states that the price P of a product is determined by a balance between production at each price (supply S) and the desires of those with [[purchasing power]] at each price (demand D): the diagram shows a positive shift in demand from D<sub>1</sub> to D<sub>2</sub>, resulting in an increase in price (P) and quantity sold (Q) of the product.]]
In capitalist economic structures, supply and demand is an [[economic model]] of [[price determination]] in a [[Market (economics)|market]]. It postulates that in a [[perfect competition|perfectly competitive market]], the [[unit price]] for a particular [[Good (economics)|good]] will vary until it settles at a point where the quantity demanded by consumers (at the current price) will equal the quantity supplied by producers (at the current price), resulting in an [[economic equilibrium]] for price and [[Output (economics)|quantity]].

The "basic laws" of [[Supply (economics)|supply]] and [[demand]], as described by David Besanko and Ronald Braeutigam, are the following four:<ref name="besanko-and-braeutigam-2010">{{cite book |last1=Besanko |first1=David |last2=Braeutigam |first2=Ronald |year=2010 |title=Microeconomics |publisher=[[Wiley (publisher)|Wiley]] |edition=4th}}</ref>{{rp|37}}
# If demand increases (demand curve shifts to the right) and supply remains unchanged, then a shortage occurs, leading to a higher equilibrium price.
# If demand decreases (demand curve shifts to the left) and supply remains unchanged, then a surplus occurs, leading to a lower equilibrium price.
# If demand remains unchanged and supply increases (supply curve shifts to the right), then a surplus occurs, leading to a lower equilibrium price.
# If demand remains unchanged and supply decreases (supply curve shifts to the left), then a shortage occurs, leading to a higher equilibrium price.

=== Supply schedule ===
A supply schedule is a table that shows the relationship between the price of a good and the quantity supplied.<ref name="Boundless Economics 2017">{{cite web |title=Supply |website=Boundless Economics |date=13 June 2017 |url=https://courses.lumenlearning.com/boundless-economics/chapter/supply/ |access-date=27 October 2021}}</ref>

=== Demand schedule ===
A demand schedule, depicted graphically as the [[demand curve]], represents the amount of some [[Good (economics)|goods]] that buyers are willing and able to purchase at various prices, assuming all determinants of demand other than the price of the good in question, such as income, tastes and preferences, the price of [[substitute good]]s and the price of [[complementary good]]s, remain the same. According to the [[law of demand]], the demand curve is almost always represented as downward sloping, meaning that as price decreases, consumers will buy more of the good.<ref name="axes">Unlike most [[Graph of a function|graphs]], supply & demand curves are plotted with the independent variable (price) on the vertical axis and the dependent variable (quantity supplied or demanded) on the horizontal axis.</ref>

Just like the supply curves reflect [[marginal cost]] curves, demand curves are determined by [[marginal utility]] curves.<ref>{{cite web|title=Marginal Utility and Demand |url=http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=marginal+utility+and+demand |access-date=9 February 2007 |archive-date=6 November 2006 |archive-url=https://web.archive.org/web/20061106121422/http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=marginal+utility+and+demand |url-status=live}}</ref>

=== Equilibrium ===
{{further|Economic equilibrium}}
In the context of supply and demand, economic equilibrium refers to a state where economic forces such as [[supply and demand]] are balanced and in the absence of external influences the ([[:wikt:equilibrium|equilibrium]]) values of economic variables will not change. For example, in the standard text-book model of [[perfect competition]] equilibrium occurs at the point at which quantity demanded and quantity supplied are equal.<ref>{{cite book |author-link=Hal Varian |first=Hal R. |last=Varian |title=Microeconomic Analysis |edition=Third |publisher=Norton |location=New York |year=1992 |isbn=978-0-393-95735-8 |url=https://archive.org/details/microeconomicana00vari_0}}</ref> Market equilibrium, in this case, refers to a condition where a market price is established through competition such that the amount of goods or services sought by [[Law of supply and demand|buyers]] is equal to the amount of goods or services produced by [[Law of supply and demand|sellers]]. This price is often called the competitive price or [[market clearing]] price and will tend not to change unless demand or supply changes.

=== Partial equilibrium ===
{{Main|Partial equilibrium}}
Partial equilibrium, as the name suggests, takes into consideration only a part of the market to attain equilibrium. Jain proposes (attributed to [[George Stigler]]): "A partial equilibrium is one which is based on only a restricted range of data, a standard example is price of a single product, the prices of all other products being held fixed during the analysis".<ref>{{cite book |last=Jain |first=T.R. |title=Microeconomics and Basic Mathematics |year=2006 |publisher=VK Publications |location=New Delhi |isbn=978-81-87140-89-4 |page=28 |url=https://books.google.com/books?id=fUUoFwco2Z8C }}{{Dead link|date=January 2023 |bot=InternetArchiveBot |fix-attempted=yes }}</ref>

=== History ===
According to Hamid S. Hosseini, the "power of supply and demand" was discussed to some extent by several early Muslim scholars, such as fourteenth century [[Mamluk]] scholar [[Ibn Taymiyyah]], who wrote: "If desire for goods increases while its availability decreases, its price rises. On the other hand, if availability of the good increases and the desire for it decreases, the price comes down".<ref name=Hosseini>{{cite book |title=A Companion to the History of Economic Thought |chapter=Contributions of Medieval Muslim Scholars to the History of Economics and their Impact: A Refutation of the Schumpeterian Great Gap |last=Hosseini |first=Hamid S. |editor1-last=Biddle |editor1-first=Jeff E. |editor2-last=Davis |editor2-first=Jon B. |editor3-last=Samuels |editor3-first=Warren J. |year=2003 |publisher=Blackwell |location=Malden, Massachusetts |isbn=978-0-631-22573-7 |doi=10.1002/9780470999059.ch3 |pages=28–45 [28 & 38]}} (citing Hamid S. Hosseini, 1995. "Understanding the Market Mechanism Before Adam Smith: Economic Thought in Medieval Islam," ''History of Political Economy'', Vol. 27, No. 3, 539–561).</ref>

[[File:AdamSmith.jpg|thumb|upright=0.6|left|[[Adam Smith]]]]
[[John Locke]]'s 1691 work ''Some Considerations on the Consequences of the Lowering of Interest and the Raising of the Value of Money''<ref>John Locke (1691) [http://www.marxists.org/reference/subject/economics/locke/contents.htm ''Some Considerations on the consequences of the Lowering of Interest and the Raising of the Value of Money''] {{Webarchive|url=https://web.archive.org/web/20150324135856/https://www.marxists.org/reference/subject/economics/locke/contents.htm |date=24 March 2015 }}</ref> includes an early and clear description{{primary source inline|date=February 2022}} of supply and demand and their relationship. In this description, demand is [[Economic rent|rent]]: "The price of any commodity rises or falls by the proportion of the number of buyer and sellers" and "that which regulates the price... [of goods] is nothing else but their quantity in proportion to their rent".

[[David Ricardo]] titled one chapter of his 1817 work ''[[Principles of Political Economy and Taxation]]'' "On the Influence of Demand and Supply on Price".<ref name=Humphrey>Thomas M. Humphrey, 1992. "Marshallian Cross Diagrams and Their Uses before Alfred Marshall", ''Economic Review'', Mar/Apr, Federal Reserve Bank of Richmond, pp. [http://www.richmondfed.org/publications/research/economic_review/1992/pdf/er780201.pdf 3–23] {{Webarchive|url=https://web.archive.org/web/20121019100824/http://www.richmondfed.org/publications/research/economic_review/1992/pdf/er780201.pdf |date=19 October 2012 }}.</ref>
In ''Principles of Political Economy and Taxation'', Ricardo more rigorously laid down the idea of the assumptions that were used to build his ideas of supply and demand.

In his 1870 essay "On the Graphical Representation of Supply and Demand", [[Fleeming Jenkin]] in the course of "introduc[ing] the diagrammatic method into the English economic literature" published the first drawing of supply and demand curves therein,<ref>A.D. Brownlie and M.F. Lloyd Prichard, 1963. "Professor Fleeming Jenkin, 1833–1885 Pioneer in Engineering and Political Economy", ''Oxford Economic Papers'', 15(3), p. 211.</ref> including [[comparative statics]] from a shift of supply or demand and application to the labor market.<ref>Fleeming Jenkin, 1870. "The Graphical Representation of the Laws of Supply and Demand, and their Application to Labour", in Alexander Grant, ed., ''Recess Studies'', Edinburgh. Ch. VI, pp. 151–185. Edinburgh. Scroll to chapter [https://books.google.com/books?id=NC5BAAAAIAAJ link] {{Webarchive|url=https://web.archive.org/web/20200716052536/https://books.google.com/books?id=NC5BAAAAIAAJ |date=16 July 2020 }}.</ref> The model was further developed and popularized by [[Alfred Marshall]] in the 1890 textbook ''[[Principles of Economics (Marshall)|Principles of Economics]]''.<ref name="Humphrey" />