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Demand and supply curve

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  • 1. DEMAND AND SUPPLY CURVE
    On
    Kellogg's Cornflakes’
  • 2. DEMAND
    “Demand refers to the quantities of a commodity that the consumers are able and willing to buy at each possible price during a given period of time, other things being equal.”
    For e.g., A consumer demands 2kg of sugar in a month at the price of Rs. 20 per kg. This is a complete example of demand for a commodity as it has all the three components of demand- quantity, price and time.
  • 3. MAIN FEATURES OF DEMAND
    Main features of demand for a commodity are:-
    1. Demand is always with reference to a specific price.
    2. Demand is a flow of quantities bought in a given period of time.
    3. Consumer should have a desire and necessary purchasing power to buy the commodity.
    4.Consumer should be willing to pay for the commodity.
  • 4. DEMAND FUNCTION
    The Demand function may be expressed symbolically as
    Q=f (P, Pr ,Y,T,E,O)
    Where ‘Q’ stands for the quantity demanded of the Commodity, ‘P’ for the price of the commodity, ‘Pr’ for prices of related goods, ‘Y’ for income of the consumer, ‘T’ for tastes and preferences of the consumer, ‘E’ for the expectations for the future prices and ‘O’ stands for the other factors
  • 5. Demand function of cornflakes’
    So the Demand of Kellogg's cornflakes’ that includes
    • Price of the product
    • 6. Substitutes-local brands with less cost
    • 7. Income of the consumer
    • 8. Tastes and preferences
    And so many other factors
    -The Demand function of Kellogg's is given by:
    Q=f(Price of cornflakes’, local brands, income, tastes and preference and other factors-flavour likes honey, wheat)
  • 9. LAW OF DEMAND
    The law of demand explains the relationship between two variables- price of the commodity and the quantity of the commodity demanded, other things being constant Symbolically,
    Dx = f(Px)
    Where Dx = demand of x commodity
    Px = price of x commodity
  • 10. DEMAND SCHEDULE- KELLOGG’S CORNFLAKES
    The numerical tabulation of the law of demand is called the demand schedule.
    Following table shows a hypothetical demand schedule for Kellogg’s Cornflakes’
  • 11. The demand schedule shows an inverse relationship between price and the quantity demanded. The consumer is willing to pay 60 rupees per kg to buy 1 kg of cornflakes each month. If the price reduces by 30 rupees , he/she would be willing to buy an additional one or two kg per month and so on. This implies that lower the price more will be the demand and vice versa.
    Demand Curve
    The graphical representation of the demand schedule is called a demand curve. The Demand curve for Kellogg’s cornflakes is drawn which shows different quantities of cornflakes demanded at different prices in a month
  • 12. Diagrammatic representation
    • A downward sloping or negatively sloped demand curve relates quantity demanded to price.
    D
    60
    Price
    (Rs per kg)
    C
    50
    B
    40
    A
    30
    DEMAND
    0
    4
    3
    2
    1
    Quantity (kg per month)
  • 13. SUPPLY
    According to Prof. Thomas, “The supply of goods is the quantity offered for sale in a given market at a given time at various prices.”
    Thus the supply is defined as the total quantity of a commodity that a seller is willing to produce and sell at a given price, during a given period.
    Typically involves the terms on which businesses produce and sell their products.
  • 14. SUPPLY FUNCTION
    Supply of a commodity is determined by various factors. Supply function is a functional relationship between quantity supplied of a commodity and factors affecting it. Supply function can be written as
    Sx =f (Px,Pr,T,F,Gp)
    Where Sx= Supply of commodity X, f=function of, Px =price of commodity X, Pr= Price of related commodity, T= technology, F=prices of factor inputs Gp =Government policy
  • 15. Supply function of cornflakes’
    So the supply of Kellogg's cornflakes that includes
    • Price of the commodity
    • 16. Technology they are using
    • 17. Price of related commodities
    and
    • Government policies- Taxes
    • 18. So the supply of Kellogg’s cornflakes’ is given by
    S=f(Price, Price of other Substitutes, Technology, Govt policies)
  • 19. LAW OF SUPPLY
    As the price of a good increases, suppliers will attempt to maximize profits by increasing the quantity of the product sold. 
    Or
    All other factors being equal, as the price of a good or service increases, the quantity of goods or services offered by suppliers increases and vice versa.
  • 20. SUPPLY SCHEDULE- KELLOGG’S CORNFLAKES’
    The numerical tabulation of the law of supply is called the supply schedule.
    Following table shows a hypothetical supply schedule for Kellogg’s Cornflakes’
  • 21. The supply schedule for cornflakes shows that at a price of cornflake box of 30, only 10 boxes will be produced in an year. At such a low price, breakfast manufacturers might want to devote their factories to producing other types of cereal, like bran flakes, that earn them more profit than cornflakes. So , as the price of cornflakes increases, even more cornflakes will be produced .
    Supply curve
    The graphical representation of the Supply schedule is called a Supply curve. The Supply curve for Kellogg’s cornflakes is drawn which shows different quantities of cornflakes supplied at different prices.
  • 22. Diagrammatic representation
    • Supplycurve or Supply schedule relates quantity Supplied to Price
    S
    60
    Price
    (Rs per Box)
    50
    40
    30
    S
    0
    40
    30
    20
    10
    Quantity (Boxes per Year)
  • 23. Prepared
    By
    AN IL KUMAR.K
  • 24. Any Questions