Labeled D, the Demand Curve reflects the Law of Demand in a downward slope. The Law of Demand is the representation of the inverse relationship between price and quantity demanded, with more quantity being demanded as price falls, and less being demanded when price rises, and vice versa. The less expensive a product is, the more people will buy it.

Labeled S, the Supply Curve reflects the Law of Supply in an upward slope. The Law of Supply is the representation of the direct relationship between price and quantity supplied. As quantity supplied rises, price rises, and when quantity supplied falls, price falls, and vice versa. The more expensive a product is, the more of it producers will be willing to sell.

The Equilibrium Point is the intersection of the supply and demand curves. It represents the price, P1, at which producers are willing to make the same quantity of product, Q1, that consumers will purchase.

The consumer surplus represents the money saved by consumers who would have been willing to pay a higher price for the product but instead paid the lower market price.

The producer surplus represents the money gained by producers who would have been willing to sell the product for a lower price but instead got the higher market price.