This document discusses the basic elements of supply and demand. It defines demand and supply schedules and curves, and the laws of demand and supply. It also outlines several factors that affect supply and demand curves, such as changes in tastes, income, prices of related goods, technology, and government policies. The document also discusses market equilibrium and how shifts in supply and demand curves impact equilibrium price and quantity. Specifically, it explains how a rightward shift in demand or supply results in a higher equilibrium price, while a leftward shift decreases the equilibrium price.

1. Basic Elements Of Supply And Demand Chapter 3

2. Topics : Demand Demand Schedule Law of demand Factors Affecting Demand curve Supply Supply Schedule Law of supply Factors Affecting Supply curve

3. Demand Curve 20 1 15 2 12 3 10 4 9 5 Quantity Price

4. Factors effect the demand curve Change in taste Prices of other goods Substitute Complement 4. Income 5. Government rules and regulation 6. Other factors

5. Change in taste: Advertisement effect our taste Increase in demand Quantity X Price D2 D

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. 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. Change in Income Quantity X Price Increase in demand D2 D

9. Change in Government Regulation (Sales tax) Decrease in demand D1 Quantity X Price

10. Supply: 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

11. Supply Curve 0 1 7 2 12 3 16 4 18 5 Quantity Price

12. Technology Input prices Prices of related goods Government policy Special influences Factors effect the Supply curve

13. S’ S Quantity price Increase in supply

14. Quantity price S’ s Decrease In Supply

15. Conti…. Market equilibrium Shifts in equilibrium

16. 20 0 1 15 7 2 12 12 3 10 16 4 9 18 5 Qty demand Qty supply Price

18. Quantity Price S D Excess Supply or Surplus 3 11 Excess Supply or Surplus

19. Quantity Price S D Excess Demand Or shortage Excess Demand Or shortage 3 11

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

21. Quantity S D Price Floor In price Floor minimum amount restriction 8 5 10 20 price Price Floor

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

23. Increase in Demand, Rightward shift Quantity Price S D D’

24. Shift in Equilibrium S’ Increase in supply, Rightward shift Quantity Price S D