Basic elements of supply and demand

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Basic elements of supply and demand

  1. 1. Basic Elements Of Supply And Demand Chapter 3
  2. 2. Topics : <ul><li>Demand </li></ul><ul><li>Demand Schedule </li></ul><ul><li>Law of demand </li></ul><ul><li>Factors Affecting Demand curve </li></ul><ul><li>Supply </li></ul><ul><li>Supply Schedule </li></ul><ul><li>Law of supply </li></ul><ul><li>Factors Affecting Supply curve </li></ul>
  3. 3. Demand Curve 20 1 15 2 12 3 10 4 9 5 Quantity Price
  4. 4. Factors effect the demand curve <ul><li>Change in taste </li></ul><ul><li>Prices of other goods </li></ul><ul><li>Substitute </li></ul><ul><li>Complement </li></ul><ul><li>4. Income </li></ul><ul><li>5. Government rules and regulation </li></ul><ul><li>6. Other factors </li></ul>
  5. 5. Change in taste: Advertisement effect our taste Increase in demand Quantity X Price D2 D
  6. 6. Change in Prices of other goods (substitute ) E.g.: Price of coke increases, demand of Pepsi increases Price Increase in demand D2 D Quantity (Pepsi)
  7. 7. Change in Prices of other goods (Complement ) E.g.: Price of tea increases, demand of sugar decreases Decrease in demand D D1 Quantity (sugar) Price
  8. 8. Change in Income Quantity X Price Increase in demand D2 D
  9. 9. Change in Government Regulation (Sales tax) Decrease in demand D1 Quantity X Price
  10. 10. Supply: <ul><li>The supply schedule for a commodity shows the relationship between market price and the amount of that commodity that producers are willing to produce and sell other held constant </li></ul>
  11. 11. Supply Curve 0 1 7 2 12 3 16 4 18 5 Quantity Price
  12. 12. <ul><li>Technology </li></ul><ul><li>Input prices </li></ul><ul><li>Prices of related goods </li></ul><ul><li>Government policy </li></ul><ul><li>Special influences </li></ul>Factors effect the Supply curve
  13. 13. S’ S Quantity price Increase in supply
  14. 14. Quantity price S’ s Decrease In Supply
  15. 15. Conti…. <ul><li>Market equilibrium </li></ul><ul><li>Shifts in equilibrium </li></ul>
  16. 16. 20 0 1 15 7 2 12 12 3 10 16 4 9 18 5 Qty demand Qty supply Price
  17. 18. Quantity Price S D Excess Supply or Surplus 3 11 Excess Supply or Surplus
  18. 19. Quantity Price S D Excess Demand Or shortage Excess Demand Or shortage 3 11
  19. 20. Quantity S D Price Ceiling price Price Control: in which govt. restrict to suppliers and give them limits to charge In price Ceiling maximum amount restriction Price Ceiling 3 5 10 15
  20. 21. Quantity S D Price Floor In price Floor minimum amount restriction 8 5 10 20 price Price Floor
  21. 22. Demand and supply curve shifts and there effects on price and quantity P Q The supply curve shift to the left If supply Falls P Q The supply curve shift to the right If supply rise P Q The demand curve shift to the left If demand Falls P Q The demand curve shift to the right If demand rise Effect on price and quantity Demand and supply shift
  22. 23. Increase in Demand, Rightward shift Quantity Price S D D’
  23. 24. Shift in Equilibrium S’ Increase in supply, Rightward shift Quantity Price S D

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