basic overview of Demand

1. 1
Business Economic
Presentation on
Demand

2. 2
Objectives
Develop the concepts of demand and supply.
Discuss the factors that lead to shifts in the
demand and supply curves.

3. Copyright © 2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Microeconomics 7/e by Jackson and McIver
Slides prepared by Muni Perumal, University of Canberra, Australia.
3
Markets
• A market is any institutional structure, or
mechanism, that brings together buyers and
sellers of particular goods and services.
• They determine the price and quantity of a good
or service transacted

4. Copyright © 2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Microeconomics 7/e by Jackson and McIver
Slides prepared by Muni Perumal, University of Canberra, Australia.
4
Demand
Demand is an economic
principle that describes a
consumer's desire and
willingness to pay a price for a
specific good or service. Holding
all other factors constant, an
increase in the price of a good
or service will decrease demand,
and vice versa.
The various amounts of a product that
consumers are willing and able to
purchase at various prices during some
specific period

5. 5
Law of Demand
Increase
in
PRICE
Decrease in
QUANTITY
Increase
in
QUANTITY
Decrease in
PRICE

6. Copyright © 2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Microeconomics 7/e by Jackson and McIver
Slides prepared by Muni Perumal, University of Canberra, Australia.
6
Demand
a 5 10
b 4 20
c 3 35
d 2 55
e 1 80
Price Quantity demanded
per unit per week

7. Copyright © 2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Microeconomics 7/e by Jackson and McIver
Slides prepared by Muni Perumal, University of Canberra, Australia.
7
D1
D1
Demand
P
Q0
5
4
3
2
1
10 20 30 40 50 60 70 80
Price($perunit)
Quantity demanded (units per week)
a
b
c
d
e

8. Copyright © 2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Microeconomics 7/e by Jackson and McIver
Slides prepared by Muni Perumal, University of Canberra, Australia.
8
Changes in Demand
• Prices of related goods
– Substitute goods
– Complementary goods
– Independent goods
• Expectations
• Seasons/weather

9. Copyright © 2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Microeconomics 7/e by Jackson and McIver
Slides prepared by Muni Perumal, University of Canberra, Australia.
9
Changes in Demand
• Tastes or preferences
• Number of buyers
• Income
– Normal or superior goods—demand varies
directly with income
– Inferior goods—demand varies inversely with
income

10. Copyright © 2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Microeconomics 7/e by Jackson and McIver
Slides prepared by Muni Perumal, University of Canberra, Australia.
10
Changes in Demand
(cont.)
- Caused by changes in one or other of the non-price
determinants of demand
- Represented as a shift of the demand curve either to the
right or left
- Represents a change in the quantity demand at every price,
so cannot be related to a change in price-

11. Copyright © 2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Microeconomics 7/e by Jackson and McIver
Slides prepared by Muni Perumal, University of Canberra, Australia.
11
Increase in Demand
P
Q
0
5
4
3
2
1
10 20 30 40 50 60 70 80
D1
Quantity demanded
D1
Increase in
Demand
D2
D2
Price($perunit)

12. Copyright © 2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Microeconomics 7/e by Jackson and McIver
Slides prepared by Muni Perumal, University of Canberra, Australia.
12
D1
D1 Decrease in
Demand
Decrease in Demand
P
Q
0
5
4
3
2
1
10 20 30 40 50 60 70 80
Quantity demanded
D3
D3
Price($perunit)

13. Copyright © 2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Microeconomics 7/e by Jackson and McIver
Slides prepared by Muni Perumal, University of Canberra, Australia.
13
Changes in Quantity
Demand
Caused by changes in price only
represented as movement along a
demand curve, Other factors
determining demand are held constant