Learning how to draw and understand a supply and demand graph is one of the first concepts taught in basic economics. You must fully understand a supply and demand graph before moving on to more difficult topics in microeconomics or macroeconomics. The supply and demand graph shows the willingness of buyers to purchase a good at a specified price and the quantity of goods a seller is willing to sell at a specified price.

Draw an "L" shape for the frame of the graph. The vertical line is the y-axis and should be labeled "price." The horizontal line is the x-axis and should be labeled "quantity."

Label number amounts on each axis. On the y-axis you need to label each interval with a dollar amount, such as $2, $4, $6, etc. On the x-axis you need to label the each interval with the quantity amounts, such as 5, 10, 15, etc.

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Gather demand and supply data so you can plot the supply and demand lines. Plot your coordinates on the graph. Plot the demand data in one color and the supply data in another. If, for example, someone demands five goods when the price of each good is $2, you will plot that information at the 5x,2y coordinate. If the supplier is willing to sell 10 goods when the price of each good is $15, you will plot that information at the 10x,15y coordinate.

Draw one line connecting all the demand coordinates and another line connecting the supply coordinates. The demand line will almost always have a negative slope, meaning the line goes from the y-axis downward toward a point on the x-axis. The supply line will almost always have a positive slope, meaning the line goes from the intersection of the x and y-axis upward. Label the lines as "Demand" and "Supply." The point at which the demand and supply lines intersect is called the "equilibrium."