How to Make a Supply and Demand Graph in Excel

Creating a supply and demand graph is a fundamental skill for understanding market dynamics, but getting it right in Excel can be a little tricky. If you’ve ever tried to build one and ended up with a tangled mess of lines, you’re not alone. This guide will walk you through a simple, step-by-step process to set up your data, create a clean supply and demand graph, and interpret what it’s telling you.

First, a Quick Refresher on Supply and Demand

Before diving into Excel, let's quickly review the core concepts. A supply and demand graph visually represents the relationship between the price of a good or service and the quantity that consumers want to buy and producers are willing to sell. It's the backbone of market economics, and it’s composed of two main lines:

• The Demand Curve: This line shows the relationship between a product's price and the quantity consumers are willing to buy. Generally, as the price goes down, the quantity demanded goes up. Think of it from your own perspective: you’d probably buy more of your favorite coffee if it were cheaper.
• The Supply Curve: This line shows the relationship between a product's price and the quantity producers are willing to make. In contrast to demand, as the price goes up, the quantity supplied also goes up, because it becomes more profitable for businesses to produce it.

The magic happens where these two curves cross. This intersection is called the equilibrium point, which reveals the market price where the quantity consumers want to buy perfectly matches the quantity producers want to sell. This is the theoretical sweet spot where both sides are happy.

Setting Up Your Data in Excel

Your graph is only as good as the data behind it. Properly organizing your information is the most important step and will save you a lot of headaches. Excel needs three columns to build a standard supply and demand graph.

Let’s use the example of a hypothetical market for weekly avocado boxes.

Your table should be structured like this:

A few key points about this structure:

• Price on the Left: In economics, the price is almost always shown on the vertical (Y-axis). While usually the Y-axis data comes after X-axis data in Excel tables, placing it on the far left here makes it easier to keep track of as we build the chart.
• Quantity for Both Curves: Both the "Quantity Demanded" and "Quantity Supplied" will be plotted along the horizontal (X-axis).
• The Inverse Relationship: Notice how as the Price per Box decreases, the Quantity Demanded goes up (from 100 to 500). At the same time, the Price per Box decrease makes the Quantity Supplied go down (from 500 to 100). This inverse relationship creates the classic "X" shape of the graph.
• Finding the Equilibrium: In our example, you can see that at a price of $20, the quantity demanded and the quantity supplied are both 300. This is our equilibrium point.

Step-by-Step Guide to Creating Your Graph

With your data neatly organized, you can now create the graph in just a few steps. The key is to use the right type of chart - a simple line chart won't work correctly. You need a Scatter chart, which plots values based on X and Y coordinates.

Step 1: Select Your Data

Click and drag to highlight all the data in your table, including the column headers. In our case, that would be cells A1 through C6.

Step 2: Insert a Scatter Chart with Smooth Lines

With your data selected, navigate to the Insert tab on Excel's top ribbon. In the Charts section, look for the icon that looks like a dot plot - this is the Scatter (X, Y) or Bubble Chart option.

Click on it and select the "Scatter with Smooth Lines" option (you can also use "Scatter with Straight Lines" if you prefer angular lines). This chart type correctly plots your demand and supply curves using the price as the Y-value and the quantities as the X-values.

At this point, a basic chart will appear on your worksheet. It's a start, but we need to refine it.

Step 3: Correct Your Data Series (If Necessary)

Sometimes, Excel plots the data perfectly on the first try. Other times, it gets confused and plots the data incorrectly, such as putting Price on the x-axis. If your graph doesn't look like the classic 'X' shape, don't worry - it’s an easy fix.

1. Right-click anywhere on the chart area and select Select Data...
2. A menu will pop up. On the left side, under "Legend Entries (Series)," you'll see your data series. Let’s focus on the "Quantity Demanded" series first. Click on it and press the Edit button.
3. Another box will appear. Here you can tell Excel exactly which cells to use for the X and Y axes.
4. Click OK. Now, do the same thing for your "Quantity Supplied" series. Click edit and ensure:

After clicking OK, your graph should now correctly display both the supply and demand curves crossing in the middle.

Step 4: Add and Format Chart Elements

A graph without labels is just a picture. Let’s make it useful.

• Title Your Chart: Double-click the chart title to change it to something descriptive, like "Supply and Demand for Avocado Boxes."
• Add Axis Titles: Click on the chart. A green "+" icon should appear on the top right. Click it, check the box for Axis Titles. Then click on the new titles on your chart to label the vertical axis "Price" and the horizontal axis "Quantity."
• Clean Up the Legend: The default legend works fine, but you can move or format it by clicking on it and using the formatting pane that appears on the right.

Step 5: Identify the Equilibrium Point on the Graph

For extra credit and a more professional look, you can explicitly mark the equilibrium point on the graph. In our data table, we know the equilibrium occurs at (Quantity: 300, Price: $20).

1. In your worksheet (off to the side is fine), add two additional columns for your equilibrium point data, like this:

1. Right-click on your chart and go to Select Data... again.
2. Click the Add button.
3. In the "Edit Series" dialog box that appears:
4. Click OK. Your graph now has a single dot representing equilibrium. Right-click on this new dot, select Add Data Label, and then select "Add Data Label" again to show its coordinates.

How to Read Your Graph

Now that you have a beautiful supply and demand graph, what does it actually tell you? Beyond just creating the chart, understanding its implications is where the real value lies.

The Equilibrium Point

As we've covered, the point where the supply and demand curves intersect is your equilibrium price and quantity. In our avocado box example, this is a price of $20, where 300 boxes are both supplied and demanded. In a perfect world, this is the price the market would settle on.

What Happens When Price Is Too High? (Surplus)

Look at the price point of $30 on your graph. At this price, suppliers are willing to produce 500 boxes because it's highly profitable. However, consumers only want to buy 100 boxes because they're too expensive. The gap between the 500 supplied and the 100 demanded is called a surplus. In the real world, this would lead to retailers having unsold avocados, forcing them to lower their prices to clear inventory, which pushes the price back down toward equilibrium.

What Happens When Price Is Too Low? (Shortage)

Now look at the price point of $10. Here, consumers are thrilled and want to buy 500 boxes. But suppliers are reluctant to produce more than 100 boxes at such a low price. This gap between the 500 demanded and the 100 supplied is a shortage. This means empty shelves and unhappy customers, which allows sellers to raise prices due to the high demand, pushing the price back up toward equilibrium.

Final Thoughts

Building a supply and demand graph in Excel might seem daunting, but it's entirely manageable when you properly structure your data and use the Scatter chart type. By visually mapping out these curves, you can instantly see the market's equilibrium price, as well as the effects of pricing too high or too low.

Ultimately, a deep understanding of your business data - whether it's market dynamics, sales funnels, or campaign performance - is essential. Often, the hardest part isn't creating a chart but gathering, cleaning, and connecting the data from different places just to get started. At Graphed, we created a tool that automates this entire process. Instead of downloading CSVs and manually VLOOKUP-ing your way through spreadsheets, you can connect your data sources once, then just ask a question in plain English to see live dashboards and reports in seconds. It allows you to skip hours of manual work and get right to the insights.