From the course: Cert Prep: CFA Exam Level 1
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Supply and demand analysis on the CFA
From the course: Cert Prep: CFA Exam Level 1
Supply and demand analysis on the CFA
- [Instructor] Now that you understand quantitative methods for the CFA exam, let's move on to economics, and we'll start by exploring supply and demand, the building blocks of economics and essential tools for understanding financial markets. As the saying goes, economics is the parent of finance and investing. These core concepts shape everything from stock prices to interest rates, consumer behavior, and market cycles, among many other aspects of the business world. Supply and demand explain how prices are set in a competitive market. Demand reflects the behavior of buyers. Supply reflects the behavior of sellers. Where the two curves intersect is the equilibrium price, the price which quantity demanded equals quantity supplied. The law of demand says that when prices go up, people buy less. It's an inverse relationship. As the price of a good rises, the quantity demanded falls, holding everything else constant.…
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