The effect of changes in demand The effect of changes in supply Changes in demand and supply

1. Price Changes
MUDASSIR RAZA
ECONOMICS

2. T O D A Y ' S A G E N D A
The effect of changes in demand
The effect of changes in supply
Changes in demand and supply
Welcome
to class!

3. i. The effect of an increase in demand ii. The effect of a decrease in demand
The effect of changes in
demand

5. The effect of a
decrease in
demand

6. Activity: A fall in demand and market price
Below is a market and supply schedule for ballpoint pens.
Plot and label the demand curve and supply curve for ballpoint pens.
Mark in the market price and the quantity traded at this price.
Imagine now the demand falls by 200 units at each and every price. Draw and label the new demand curve.
What is the new market price and the new quantity traded. Show these on your graph.

7. i. The effect of an increase in supply ii. The effect of a decrease in supply
The effect of changes in
supply

9. The effect of a
decrease in
supply

10. Plot and label the demand curve and supply curve for wheat.
Mark in the market price and the quantity traded at this price.
Imagine now that supply falls by 200,000 tonnes at each and every price. Draw and label the new supply
curve.
What is the new market price and the new quantity traded. Show these on your graph.
Activity: A fall in supply and market price
Below is a market demand and supply schedule for wheat (tonnes per year)

11. Do you have
questions so far?

12. Changes in demand and supply
The effect of demand increasing more than supply The effect of supply increasing more than demand

13. You should know:
An increase in demand will raise price and cause an extension in supply.
A decrease in demand will lower price and cause a contraction in supply.
An increase in supply will lower the price and cause an extension in demand.
A decrease in supply will raise the price and cause a contraction in demand.
An increase in supply will lower the price and cause an extension in demand.
A decrease in supply will raise the price and cause a contraction in demand.

14. Four-part question:
a. Identify 2 causes, apart from an increase in income, of an increase in demand for a product (2)
b. Explain why an increase in wages is likely to increase demand but may reduce supply. (4)
c. Analyze, using a demand and supply diagram, the granting of a subsidy to the producers of a product. (6)
d. Discuss whether or not the price of air travel is likely to rise in the future. (8)

15. Thank you!