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The Supply and Demand model is a macroeconomic model that explains price level and output through the relationship of aggregate demand and aggregate supply.
Demand
Demand refers to the amount of goods and services that buyers are willing to purchase. Typically, demand decreases with increases in price; this trend can be graphically represented with a demand curve. Demand can be affected by changes in income, changes in price, and changes in relative price.
Supply
Supply refers to the amount of goods and services that sellers are willing to sell. Typically, supply increases with increases in price, this trend can be graphically represented with a supply curve.
Equilibrium Price
The price of a good or service at which quantity supplied is equal to quantity demanded. Also called the market-clearing price. At the equilibrium price buyers want to buy exactly the same amount that sellers want to sell. If the price were higher, however, sellers would want to sell more than buyers would want to buy. Likewise, if the price were lower, quantity demanded would be greater than quantity supplied.
In the IndustryMasters simulation the Equilibrium Price is determined by the aggregate demand to aggregate Supply functions for each industry. The aggregate Demand is driven by the Economy Size and the aggregate Supply depends solely on the participants investment decisions.
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