Supply-demand analysis is a basic tool of microeconomics. In competitive markets,supply and demand curves tell us how much will be produced by firms and how much will be demanded by consumers as a function of price. Surplus Shortage : : Q*❑ Supply-demand analysis is a basic tool of microeconomics. In competitive markets, supply and demand curves tell us how much will be produced by firms and how much will be demanded by consumers as a function of price. Q P Q* P* S D Surplus Shortage