This was a long module because the elements of supply and demand are so closely related. If there is a shock to the supply curve causing a shift in supply, there will be a change in price and a moment along the demand curve. You should take from this module the many factors that affect how we consume goods and services, and how external forces affect production. In many cases, exogenous changes are out of our control as both consumers and producers. However, it is important to be able to identify change and to estimate what might happen next so that we can make good decisions. Producers need to understand what affects demand for their products so they can make smart decisions with respect to expanding capacity, offering items at discounted prices, and understanding the effects of taxes for example. When producers realize that consumers’ tastes for their products can lead to increases in demand for products and price, they will worker harder to ensure consumers demands are met – for the good of both groups. Producers understanding the effects of rising incomes in other parts of the world can seek to export products and enter new markets to expand their market base.
As consumers, it’s good to know what is happening with production as well. Every week at the grocery store we see prices change that affect how we eat and feed our families. Higher prices for dairy or cauliflower might mean we change the menu for a while to save money and substitute to other food products. You should now be able to read news articles about changes in agricultural production and consumer demand for products and articulate the market mechanisms at work.