By minding your P s and Q s—the shifts of and movements along curves—you can describe almost all events in terms of supply and demand.
The determination of prices of currencies—foreign exchange rates—can be analyzed with the supply and demand model in the same way as any other good can be.
A price ceiling is a government-imposed limit on how high a price can be charged. Price ceilings below market price create shortages.
A price floor is a government-imposed limit on how low a price can be charged. Price floors above market price create surpluses.
Taxes and tariffs paid by suppliers shift the supply curve up by the amount of the tax or tariff. They raise the equilibrium price (inclusive of tax) and decrease the equilibrium quantity.
Quantity restrictions increase equilibrium price and reduce equilibrium quantity.
In a third-party-payer market, the consumer and the one who pays the cost differ. Quantity demanded, price, and total spending are greater when a third party pays than when the consumer pays.
