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supply and deman.pptx
1.
2. Introduction
Supply and Demand are the most fundamental concepts and the
most powerful of all economic tools
Supply and Demand are two economic terms used to explain the
behaviour of people (consumers & producers) in the market
Also called the ‘’Market Forces’’ are useful in explaining the
relationship between quantity and price of commodities.
4. Definition
Demand refers to an effective desire.
desire becomes an effective desire or demand only when it is
backed by the following three factors
Willingness to pay for the good desired,
Ability to pay the price of the good desired, and
Availability of the good itself
There fore:
5. Cont.…
Demand; is consumer's desire to purchase goods and services
with willingness to pay a specific price for them.
Quantity Demanded; the amount of a good that buyers
(Consumers) are willing and able to purchase.
Law of Demand; states that; other things being constant ‘’ the price
of a commodity is inversely related to its price’’.
as price of a commodity increases (decreases) quantity demanded
for that commodity decreases (increases),
6. Cont.…
The demand of a commodity can be shown in
Table (Demand Schedule), Graph (Demand Curve), and Equation
(Demand Equation)
Demand schedule: is a table showing the quantity demanded of a good
at various price levels.
It can shows the relationship between price and quantity demanded
in a table form.
8. The above table show the quantity of ice cream demanded at each
price by an individual ‘’ individual demand schedule’’
The inverse relationship between the price and quantity
demanded of a commodity can be seen
A demand schedule is either individual demand schedule or
market demand schedule.
9. Market demand schedule is table that shows different quantities of a commodity
demanded by different consumers in a market at various prices.
10. Demand Curve: is a graph showing the quantity demanded of a good
at various price levels
It is a graphical representation of the demand schedule
It also shows the relationship between quantity demanded and price
The demand curve is downward sloping curve showing the negative
relationship between the price and quantity demanded of a
commodity
13. Demand Function mathematically shows the relationship between
price and quantity demanded, all other things remaining the
same.
A typical demand function is given by:
Qd=f(P)
where Qd is quantity demanded and P is price of the commodity.
14. Determinants of Demand
These are the main determinant of demand ‘’ as they change the demand
make a change’’
Price of the product
Taste or preference of consumers
Income of the consumers
Price of related goods
Consumers expectation of income and price
Number of buyers in the market
15. Effect of the Determinants on demand
A change in the price of the products will change the quantity
demanded of the products ‘’ change in quantity demanded’’.
This effect can be shown in the demand curve and it causes Movement
along the demand curve
The movement can be either down-ward ‘’ extension of demand’’ or
upward movement ‘’ contraction of demand’’
16. Changes in Quantity Demanded
Price
D1
0 2 4
$4.00
2.00
C
A
In increase in price results in a movement
along the demand curve.
Number of Burgers
17. A change in non-price determinant of demand causes a change in
the demand of the product with same price.
This effect can be shown in the demand curve and causes a shift
od demand curve
The movement can be either right-ward shift ‘’ indicating an
increase in demand’’ or left-ward shift ‘’indicating a decrease in
demand curve’’
18. Change in Demand
Price
Quantity of Burgers
D3
0 2 4
$2.00
A ∆ in non-price determinants cause a
shift in demand curve
D1
D2
6
21. Cont.…
Supply; refers to products that producer’s are willing and able to
offer for sale at a corresponding price for them.
Quantity Supplied ; the amount of a good that producers
(suppliers) are willing and able to offer for sale.
Law of Supply; states that; other things being constant ‘’ the price of
a commodity is directly related to its price’’.
as price of a commodity increases (decreases) quantity demanded
for that commodity increases (decreases),
22. Cont.…
The supply of a commodity can be shown in
Table (supply Schedule), Graph (supply Curve), and Equation
(supply Equation)
Supply schedule: is a table showing the quantity supplied of a
good at various price levels.
It can shows the relationship between price and quantity supplied
in a table form.
24. The above table show the quantity of clothes supplied at each
price by an individual ‘’ individual supply schedule’’
The direct relationship between the price and quantity supplied of
a commodity can be seen
A supply schedule can be individual supply schedule or market
supply schedule.
25. Market Supply schedule is table that shows different quantities of a commodity
supplied by different consumers in a market at various prices.
26. Supply Curve
Supply Curve: is a graph showing the quantity supplied of a good at
various price levels
It is a graphical representation of the Supply schedule
It also shows the relationship between quantity supplied and price
The Supply curve is upward sloping curve showing the positive
relationship between the price and the quantity supplied of a
commodity
29. Determinants of Demand
These are the main determinant of supply ‘’ as they change the demand make a
change’’
Price of the product
Price of the inputs
Technology
Price of related goods
Governmental interventions
Number of Sellers in the market
30. Effect of the Determinants on demand
A change in the price of the products will change the quantity supplied
of the products ‘’ change in quantity supplied’’.
This effect can be shown in the supply curve and it causes Movement
along the supply curve
The movement can be either down-ward ‘’ contraction of supply ’’ or
upward movement ‘’ extension of supply’’
32. In the above diagram is showing the changes in quantity supplied
of a commodity to change in price
At firs, the supply of the commodity is shown in P1, indicating
the quantity of the commodity with the price supplied
Then due to change in price, the supply of the commodity is
changed making movement along the curve and forming P2
33.
34.
35. A change in non-price determinant of supply causes a change in
the supply of the product with same price.
This effect can be shown in the supply curve and causes a shift of
the supply curve
The movement can be either right-ward shift ‘’ indicating an
increase in supply ’’ or left-ward shift ‘’indicating a decrease in
supply’’
38. In the above diagram, showing the changes in supply curve due to non-
price determinants of the supply
At firs, the supply of the commodity is shown in S1, indicating the
quantity of the commodity and the price supplied
Then an effect of ‘’NPD’’ cause the curve to shift S2 to ‘’leftward’’
indicating a decrease in supple
again, another effect cause the curve to shift to S3 ‘’rightward’’
indicating an increase in supply
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53.
54. Supply Function mathematically shows the relationship between
price and quantity supplied, all other things remaining the same.
A typical supply function is given by:
Qd=f(P)
where Qd is quantity demanded and P is price of the commodity.
