Law of demand and supply - Unitedworld School of Business

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Law of demand and supply - Unitedworld School of Business

  1. 1. Demand Supply ApproachDemand Supply Approach
  2. 2. Supply and Demand Analysis1. The demand schedule2. The demand curve3. Demand shiftsElasticity of demand4. Price elasticity of demand5. Calculating elasticities6. Elasticity and revenue7. Income elasticity of demand8. Cross elasticity of demand9. Analysis of supply10. The supply schedule11. The supply curve12. Behind the supply curve13. Shift in supply14. Price elasticity of supplyEquilibrium of supply and demand curves15. Equilibrium with supply and demand curves16. Effect of shift in supply or demand17. Interpreting the changes in prices and quantity18. Simultaneous shift in supply and demand19. Rationing by pricesApplying supply and demand20. Impact of a Tax on price and quantityPrices fixed by law21. Minimum floor and maximum ceilings
  3. 3. Demand FunctionDemand FunctionAmount of goods that a consumer isAmount of goods that a consumer iswilling top buy and able to purchasewilling top buy and able to purchaseover a period of time is known asover a period of time is known asquantity demanded for that goodquantity demanded for that goodFlow conceptFlow conceptDemand is relationship betweenDemand is relationship betweenprice and quantity demanded otherprice and quantity demanded otherthings remaining constantthings remaining constantXX11 = f {P= f {P11}}
  4. 4. Demand ScheduleDemand SchedulePricePriceQuantity DemandedQuantity Demanded500500 10 lakhs10 lakhs450450 11 lakhs11 lakhs400400 12 lakhs12 lakhs350350 13 lakhs13 lakhs300300 14 lakhs14 lakhs250250 15 lakhs15 lakhs200200 16 lakhs16 lakhs150150 17 lakhs17 lakhs
  5. 5. Demand CurveDemand CurvePriceDemandDemand Curve0YX
  6. 6. Law of DemandLaw of DemandDemand curve depicts the inverseDemand curve depicts the inverserelationship between price and quantityrelationship between price and quantitydemandeddemandedDownward slopingDownward slopingOther things remaining the same, if theOther things remaining the same, if theprice of any good decreases its quantityprice of any good decreases its quantitydemanded increases and vice versademanded increases and vice versaExceptions – Giffen Goods, Veblen effect,Exceptions – Giffen Goods, Veblen effect,Future expectations, share marketFuture expectations, share market
  7. 7. Factors influencing the Demand CurveFactors influencing the Demand CurvePrices of close substitutes andPrices of close substitutes andcomplementscomplementsIncome of the consumerIncome of the consumerExisting wealth of the consumerExisting wealth of the consumerChange in the testes and preferencesChange in the testes and preferencesof the consumerof the consumerExpectations regarding futureExpectations regarding futurechanges in the priceschanges in the pricesPopulationPopulationSpecial influence – season, lawSpecial influence – season, law
  8. 8. Increase in Demand (Shift in demand curve)Increase in Demand (Shift in demand curve)An increase in incomeAn increase in incomeAn increase in wealthAn increase in wealthAn increase in prices of substitutesAn increase in prices of substitutesA decrease in the prices ofA decrease in the prices ofcomplementscomplementsA change in the taste andA change in the taste andpreferences in favor of goodpreferences in favor of goodExpectations of a future increase inExpectations of a future increase inprice of a goodprice of a good
  9. 9. Increase in demandIncrease in demandY0 XOld DemandCurveNew DemandCurvePriceQuantity Demanded
  10. 10. Decrease in Demand (Shift in demand curve)Decrease in Demand (Shift in demand curve)An Decrease in incomeAn Decrease in incomeAn Decrease in wealthAn Decrease in wealthAn Decrease in prices of substitutesAn Decrease in prices of substitutesA Increase in the prices ofA Increase in the prices ofcomplementscomplementsA change in the taste andA change in the taste andpreferences against the goodpreferences against the goodExpectations of a future decrease inExpectations of a future decrease inprice of a goodprice of a good
  11. 11. Decrease in demandDecrease in demandY0 XOld DemandCurveNew DemandCurvePriceQuantity Demanded
  12. 12. Changes in Quantity Demanded vs. Changes in DemandChanges in Quantity Demanded vs. Changes in DemandChanges in quantityChanges in quantitydemandeddemandedPP2P10Q1 Q2DDXChanges in demandedChanges in demandedPP2P10Q1 Q2DDD1D1X

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