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typically causes a change in quantity supplied or a movement along the supply curve
for that specific good or service, it does not cause the supply curve itself to shift.

Because the graphs for demand and supply curves both have price on the
vertical axis and quantity on the horizontal axis, the demand curve and supply curve
for a particular good or service can appear on the same graph (Figure 5.3). Together,
demand and supply determine the price and the quantity that will be bought and sold
in a market.

Figure 5.3 Demand Curve and Supply Curve

The point where the supply curve (S) and the demand curve (D) cross is called
the equilibrium. The equilibrium price (EP) is the only price where the plans of
consumers and the plans of producers agree – that is, where the amount of the
product consumers want to buy (quantity demanded) is equal to the amount producers
want to sell (quantity supplied). This common quantity is called the equilibrium
quantity (EQ).
When the market price is above the competitive equilibrium level, quantity
demanded is less than quantity supplied. This is a case of excess supply or a surplus.
When the price is below equilibrium, there is excess demand or a shortage – that is,
at the given price the quantity demanded, which has been stimulated by the lower
price, now exceeds the quantity supplied, which had been depressed by the lower
price.

Elasticity is an economics concept that measures responsiveness of one
variable to changes in another variable. Both the demand and supply curve show the
relationship between price and the number of units demanded or supplied. Price
elasticity is the ratio between the percentage change in the quantity demanded (Qd)
or supplied (Qs) and the corresponding percent change in price. The price elasticity
of demand is the percentage change in the quantity demanded of a good or service
divided by the percentage change in the price. The price elasticity of supply is the
percentage change in quantity supplied divided by the percentage change in price.
Elasticities can be usefully divided into three broad categories: elastic,
inelastic, and unitary. An elastic demand or elastic supply is one in which the
elasticity is greater than one, indicating a high responsiveness to changes in price.
Elasticities that are less than one indicate low responsiveness to price changes and
correspond to inelastic demand or inelastic supply. Unitary elasticities indicate
proportional responsiveness of either demand or supply.

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