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At the end of this lecture, students should be able to: Define demand and supply; know determinants of demand and supply; understand demand/supply schedule, individual demand/supply curve, market demand/supply curve; determine the market equilibrium price and its function.
Demand and Supply Analysis Learning Objectives At the end of this lecture, students should be able to • Define demand and supply • Know determinants of demand and supply • Understand Demand/supply Schedule, individual demand/supply curve, market demand/supply curve • Determine the market equilibrium price and its function What is Demand? • • It refers to the various quantities of goods and services buyers are willing and able to buy at a particular price over a given period of time Demand in economics is not just need or desire or want , It is all these things backed by a willingness and ability to pay and is known as Effective Demand Law of demand It states that … demand for a good or service falls if its price increases, and rises if its price decreases, all things being held equal or vice versa • • • • • What is the relationship between Demand and price? • Demand and price are inversely related – less quantities are purchased at a higher price, more at lower price Individual and Market Demand • • Individual Demand; these are the various quantities of goods and services individuals are willing and able to buy at various prices over a period of time Market Demand; this is the sum or total of various quantities of goods and services all consumers in the market willing and able to buy at various prices over a period of time Individual and Market demand schedule Price $ Individual consumer A Individual consumer B Market Demand 10 100 300 400 200 450 650 300 550 850 400 650 1050 500 750 1250 The demand curve The demand curve: The demand for potatoes (monthly) Market demand for potatoes (monthly) Point Price Market demand (pesewa per kg) (tonnes 000s) Price (pesewa per kg) 100 A 20 700 80 60 40 A 20 Demand 0 100 200 300 400 500 600 Quantity (tonnes: 000s) 700 800 Market demand for potatoes (monthly) Point Price Market demand (pesewa per kg) (tonnes 000s) Price (pesewa per kg) 100 20 40 A B 80 700 500 60 B 40 A 20 Demand 0 100 200 300 400 500 600 Quantity (tonnes: 000s) 700 800 Effect of a shift in the demand curve P S g Pe1 D1 O Qe1 Q Effect of a shift in the demand curve P S g Pe1 D2 D1 O Qe1 Q Effect of a shift in the demand curve P S i Pe2 g h Pe1 D2 D1 O Qe1 Qe2 Q Effect of a shift in the demand curve P S A decrease in demand g Pe1 D2 O Qe1 D1 Q Effect of a shift in the demand curve P S Pe1 Pe2 g m n D2 O Qe2 Qe1 D1 Q Demand and supply analysis Effect of shift in the supply curve Effect of a shift in the supply curve P S1 A decrease in supply g Pe1 D O Qe1 Q Effect of a shift in the supply curve P S1 g Pe1 D O Qe1 Q Effect of a shift in the supply curve P S2 S1 g Pe1 D O Qe1 Q Effect of a shift in the supply curve P S2 S1 k Pe3 j g Pe1 D O Qe3 Qe1 Q Decrease in SS, dd constant It will lead to increase in price Effect of a shift in the supply curve P S1 An increase in supply S2 g Pe1 D O Qe1 Q SS increases, dd constant It will lead to decrease in price Effect of a shift in the supply curve P S1 g Pe1 S2 p q Pe2 D O Qe1 Qe2 Q ... end of this lecture, students should be able to • Define demand and supply • Know determinants of demand and supply • Understand Demand/ supply Schedule, individual demand/ supply curve, market demand/ supply. .. over a given period of time Demand in economics is not just need or desire or want , It is all these things backed by a willingness and ability to pay and is known as Effective Demand Law of demand It states that …... 850 400 650 1050 500 750 1250 The demand curve The demand curve: The demand for potatoes (monthly) Market demand for potatoes (monthly) Point Price Market demand (pesewa per kg) (tonnes 000s)