Demand, Supply, and Market Equilibrium

This core topic delves into the fundamental forces that determine prices and quantities in a market economy. Students will analyse the law of demand and the factors influencing individual and market demand, including price, income, prices of related goods (substitutes and complements), and consumer expectations. Similarly, the law of supply and its determinants, such as input prices, technology, and producer objectives, are examined in depth. The interaction of demand and supply is used to derive market equilibrium, explaining how prices adjust to eliminate surpluses and shortages. The topic also covers applications including government interventions like price ceilings and floors, and the analysis of sales taxes and their incidence. For Zambian diploma and degree students, this module is vital for understanding price formation in local markets, from agricultural commodities to services, and for evaluating the impact of government policies on consumers and producers.