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BAEB602                      MICROECONOMICS                          CHAPTER 2                    DEMAND AND SUPPLYPREPARE...
CHAPTER 2: DEMAND AND SUPPLYLearning outcome                                                                              ...
CHAPTER 2: DEMAND AND SUPPLYTheory of Demand                                                                              ...
CHAPTER 2: DEMAND AND SUPPLYTheory of Demand                                                                              ...
CHAPTER 2: DEMAND AND SUPPLYChange in Quantity Demanded                                                                   ...
CHAPTER 2: DEMAND AND SUPPLYChange in Demand                                                                              ...
CHAPTER 2: DEMAND AND SUPPLYDeterminants of individual demand                                                             ...
CHAPTER 2: DEMAND AND SUPPLYDeterminants of individual demand                                                             ...
CHAPTER 2: DEMAND AND SUPPLYTerms in demands                                                                              ...
CHAPTER 2: DEMAND AND SUPPLYTypes of goods                                                                           TOPIC...
CHAPTER 2: DEMAND AND SUPPLYTheory of Supply                                                                  TOPIC     D...
CHAPTER 2: DEMAND AND SUPPLYTheory of Supply                                                                              ...
CHAPTER 2: DEMAND AND SUPPLYTheory of Supply                                                                              ...
CHAPTER 2: DEMAND AND SUPPLYChange in Quantity Supplied                                                                   ...
CHAPTER 2: DEMAND AND SUPPLYChange in Supply                                                                              ...
CHAPTER 2: DEMAND AND SUPPLYDeterminants of Individual Supply                                                             ...
CHAPTER 2: DEMAND AND SUPPLYEquilibrium                                                                                 TO...
CHAPTER 2: DEMAND AND SUPPLYQUIZ                                                                        TOPIC  1. Differen...
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BAEB602 Chapter 2: Demand and Supply

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Transcript of "BAEB602 Chapter 2: Demand and Supply"

  1. 1. BAEB602 MICROECONOMICS CHAPTER 2 DEMAND AND SUPPLYPREPARED BY:Nur Suhaili RamliSchool of Marketing andEntrepreneurship (SoME)FACULTY OF BUSINESS AND MANAGEMENT
  2. 2. CHAPTER 2: DEMAND AND SUPPLYLearning outcome TOPIC  Student able to define theory of demand  Student able to understand the Law of Demand  Student able to understand change in quantity demanded versus change in demand  Student able to understand factors that influence market demand Slide 2 of 17
  3. 3. CHAPTER 2: DEMAND AND SUPPLYTheory of Demand TOPIC  Definition of demand: the quantity of a good or service that buyers are willing and able to purchase at different prices in a period of time in a given market holding other non-price factors constant.  The Law of Demand: An inverse or negative relationship between the price of a good and the quantity buyers are willing to buy.  A demand schedule: It shows the quantity demanded of a product at various price levels.  A demand curve: refers to the demand curve of an individual or a consumer or a buyer. Slide 3 of 17
  4. 4. CHAPTER 2: DEMAND AND SUPPLYTheory of Demand TOPIC  Individual demand curve: It shows the relationship between the price of the product and the quantity of the product demanded by an individual producer or seller.  A market demand: It is derived by summing the quantity demanded horizontally at each and every price level Slide 4 of 17
  5. 5. CHAPTER 2: DEMAND AND SUPPLYChange in Quantity Demanded TOPIC  Factors:  Is caused solely by changes in the price of the product itself, cateris paribus.  Effects:  It is shown by movements along the same demand curve. Slide 5 of 17
  6. 6. CHAPTER 2: DEMAND AND SUPPLYChange in Demand TOPIC  Factors: Refers to change in the quantity demanded at each possible price and is changes in factors other than the good’s or product’s own price.  Effect: It is shown by a shift of the entire demand curve; either to the right or to the left. An increased in demand is shown by a right ward shift in the whole demand. A decrease in demand is shown by a leftward shift of the entire demand curve. Slide 6 of 17
  7. 7. CHAPTER 2: DEMAND AND SUPPLYDeterminants of individual demand TOPIC  Income It is highly depending on the types of the products for example normal product and inferior product. The effect for both products for the demand curve  Tastes and Preferences Tastes and preferences of consumers are influencing by many factors such as advertising, fads and fashion, the behavior of some popular artists, the development of the new products.  The effect of less preferable and more preferable of the consumers to the demand curve. Slide 7 of 17
  8. 8. CHAPTER 2: DEMAND AND SUPPLYDeterminants of individual demand TOPIC  Price of related goods The price of one product can and does effect the demand for other products. Two types of goods can either be substitute or complementary goods. Effects of the product to another product.  Number of buyers The demand for a good will vary with the number of buyers. When the number of buyers increase, the demand for most products will increase. Slide 8 of 17
  9. 9. CHAPTER 2: DEMAND AND SUPPLYTerms in demands TOPIC  Law of demand: the quantity of a good demanded per period of time will fall as price raises and will rise as price falls, other things being equal.  Income effect: The effect of a change in price on quantity demanded arising from the consumer becoming better or worse off as a result of the price change  Substitution effect: The effect of a change in price on quantity demanded arising from the consumer switching to or from alternative (substitute) products  Quantity demanded: The amount of a good that a consumer is willing and able to buy at a given price over a given period of time. Slide 9 of 17
  10. 10. CHAPTER 2: DEMAND AND SUPPLYTypes of goods TOPIC  Substitute goods: A pair of goods which are considered by consumers to be alternatives to each other. As the price of one goes up, the demand for the other rises.  Complementary goods: A pair of goods consumed together. As the price of one goes up, the demand for both goods will fall.  Normal goods: Goods whose demand increases as consumer income increase. They have a positive income elasticity of demand. Luxury goods will have a higher income elasticity of demand than more basic goods.  Inferior goods: Goods whose demand decreases as consumer income increase. Such good have a negative income elasticity of demand. Slide 10 of 17
  11. 11. CHAPTER 2: DEMAND AND SUPPLYTheory of Supply TOPIC  Definition of supply  The Law of Supply  Supply Schedule and Supply curve  Change in quantity supplied versus change in supply  Factors that influence market supply. Slide 11 of 17
  12. 12. CHAPTER 2: DEMAND AND SUPPLYTheory of Supply TOPIC  Definition of supply: The quantity of a good or service that suppliers are willing and able to sell at different prices in a period of time in a given market holding other non-price factors constant.  The Law of Supply: A direct or positive relationship between the price of a good and the quantity buyers are willing to buy.  A supply schedule: A table that shows the relationship between the quantity supplied of a product at various price levels.  A supply curve: A curve that shows the relationship between the price of product and the quantity of the product supplied. Slide 12 of 17
  13. 13. CHAPTER 2: DEMAND AND SUPPLYTheory of Supply TOPIC  Individual supply curve: It shows the relationship between the price of the product and the quantity of the product supplied by an individual producer or seller.  A market demand: It is derived by summing the quantity supplied horizontally at each and every price level. Slide 13 of 17
  14. 14. CHAPTER 2: DEMAND AND SUPPLYChange in Quantity Supplied TOPIC  Factor: It is caused solely by changes in the price of product itself.  Effects: It is shown by movements along the same supply curve, cateris paribus. It shows the movement from one point to another point. Slide 14 of 17
  15. 15. CHAPTER 2: DEMAND AND SUPPLYChange in Supply TOPIC  Factors: It refers to a change in the quantity supplied at each possible price and is caused by changes in factors other that the price.  Effects: It is shown by shifts of the entire supply curve, either to the right or to the left. Slide 15 of 17
  16. 16. CHAPTER 2: DEMAND AND SUPPLYDeterminants of Individual Supply TOPIC  Number of sellers: The larger the number of suppliers, the greater the market supply is, then the supply curve will shift to the right. The smaller the number of firms in the industry, the lesser is the market supply, and the supply curve shifts to the left.  Technology It is defined as the skills and technology concerning the use of resources in production. If there is a more advanced technology the ability to produce output will increased and therefore the supply curve will be increased. Slide 16 of 17
  17. 17. CHAPTER 2: DEMAND AND SUPPLYEquilibrium TOPIC  Market clearing: A market clears when supply matches demand, leaving no shortage or surplus.  Equilibrium price: The price where the quantity demanded equals the quantity supplied: the price where there is no shortage or surplus.  Equilibrium: A position of balance. A position from which there is no inherent tendency to move away. Slide 17 of 17
  18. 18. CHAPTER 2: DEMAND AND SUPPLYQUIZ TOPIC 1. Differentiate Macroeconomics and Microeconomics. 2. Identify “needs” and “wants”. 3. Provide 3 examples for “need” and 3 examples for “wants” 4. List down three (3) assumptions about market participants. 5. What is opportunity cost? 6. Identify three (3) main categories of resources. 7. What is Mixed Market Economy? 8. What is demand? 9. What is supply? 10. What is equilibrium? Full name: Student ID: Class code: Submission: Before leaving class. Slide 18 of 17
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