demand and supply analysis-1 sdsakldjlasjldjlasldlasjldjklasdjasljdljasldjlaskldasljdlasjlkl

8/11/2019 Demand and Supply Analysis-1 sdsakldjlasjldjlasldlasjldjklasdjasljdljasldjlaskldasljdlasjlkl

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Demand and Supply Analysis


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What is demand?

It is the quantity which consumers are ableand willing to buy at various prices duringa given period of time.

D = f (P)

D = f (Px, Pr, Y, T)


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Types of Demand

Demand for Consumers Goods and

Producers Goods Demand for Perishable and Durable

Goods Derived and Autonomous Demand

Industry and Company Demand Short-run and Long-run demand Joint and Composite Demand


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The Law of Demand

The law of demand holds that other thingsequal, as the price of a good or servicerises, its quantity demanded falls. The reverse is also true: as the price of a

good or service falls, its quantity demandedincreases.


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Demand Schedule


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Demand Curve


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Demand Curve

The demand curve has a negative slope,consistent with the law of demand.


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Causes of a Downward SlopingDemand Curve

Law of diminishing marginal utility Increase in consumer base

Increase in real income Substitution effect Putting a product to more uses


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Exceptions to the Law of Demand

War Depression

Giffen Paradox Demonstration effect Necessities of life


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Determinants of Demand

Price Income

Tastes Prices of related goods Advertisements

Spending habits Growth of population


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Determinants of Demand

Standard of living Social Customs

Future expectations Tax rate Availability of credit

Pattern of savings Demonstration effect


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Supply Schedule


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Supply Curve


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Supply Curve

The supply curve has a positive slope,consistent with the law of supply.


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Equilibrium

In economics, an equilibrium is a situationin which: there is no inherent tendency to change, quantity demanded equals quantity supplied,

and the market just clears.


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Equilibrium


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Equilibrium


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Equilibrium

Equilibrium occurs at a price of $3 and aquantity of 30 units.


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Shortages and Surpluses

A shortage occurs when quantitydemanded exceeds quantity supplied. A shortage implies the market price is too low.

A surplus occurs when quantity suppliedexceeds quantity demanded. A surplus implies the market price is too high.


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Shift in the Demand Curve


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This demand curve has shifted to the right.Quantity demanded is now higher at anygiven price.


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Equilibrium After a Demand Shift


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Shift in the Supply Curve

A change in any variable other than pricethat influences quantity supplied producesa shift in the supply curve or a change insupply.

Factors that shift the supply curve include: Change in input costs Increase in technology Change in size of the industry


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Shift in the Supply Curve


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Equilibrium After a Supply Shift


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Equilibrium After a Supply Shift

The shift in the supply curve moves themarket equilibrium from point A to point B,resulting in a higher price and lowerquantity.


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Extension and Contraction of demand(change in quantity demanded or movement

along the demand curve)

demand and supply analysis-1 sdsakldjlasjldjlasldlasjldjklasdjasljdljasldjlaskldasljdlasjlkl

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