2. Introduction
The following slides are the compilation of different
slides from five different authors about the topic
Demand and Supply.
Authors : Ankit Bist
Ujjwal 'Shanu‘
KASBIT
Jiten Sharma
NepDevWiki
4. Demand
Definition: The amount of a particular economic good or
service that a consumer or group of consumers will want to
purchase at a given price
•Law of demand :States that a quantity of a good demanded
during a given period relates inversely to its price, other things
constant.
•Price increases Quantity Demanded decreases
•Price decreases Quantity demanded increases
•Creates a downward sloping demand curve
5. Demand schedule
Demand Schedule
Demand Curve
Price [Rs per unit]
Quantity demanded of X
[kg. per month]
a
b
c
d
e
f
0.50
1.00
1.50
2.00
2.50
3.00
7.0
5.0
3.
5
2.5
1.5
1.0
3.00
f
e
2.50
d
Price of X
Point
2.00
c
1.50
b
1.00
a
0.50
1
2
3
4
5
6
7
Quantity of X
7. Factors effecting demand curve
(movements and shifts along the curve)
1. Change in taste
2. Prices of other goods
• Substitute
• Complement
3. Income
4. Government rules and regulation
8. 1.Changes in taste (shift in demand)
• Consumers prefer platform shoes.
• At $50, demand increases from 100 to 200.
$50
D
100
200
D2
9. 2.2.1Change in Prices of other goods
(substitute)
Increase in demand
E.g.: Price of coke increases,
demand of Pepsi increases
Price
Suppose the two cold drinks coke and Pepsi
are substitutes
D
D
2
Quantity (Pepsi)
10. 2.2.Change in Prices of other
goods
(Complements)Decrease in demand
(they work together)
E.g.: Price of tea increases,
demand of sugar decreases
Price
Suppose tea and sugar are complements
D1
D
Quantity (sugar)
11. 3.Change in Income
The increase in income
increases the quantity of
goods demanded (demand
increases shifts rightward)
Price
Increase in demand
D2
D
Quantity X
13. SUPPLY:
• Definition: The total amount of a good or
service available for purchase; along with
demand, one of the two key determinants of
price.
Law of supply: If demand is held constant, an
increase in supply leads to a decreased price,
while a decrease in supply leads to an
increased price.
14. Supply Schedule
The increase in price increases the
quantity supplied, e.g. price increase
from 2 to 4 an quantity increases from 3
to .
15. Factors that effect the Supply
curve
•
•
•
•
•
Technology
Changes in prices of Alternative Goods
Changes in Relevant Resources
Changes in the Number of Producers
Changes in Producers Expectations
16. 1.Changes in technology
• Technology is the economy’s stock of knowledge about how
to combine resources efficiently
Improvements in technology
Causes an increase in supply
More of the product is available at all prices
17. Changes in prices of Alternative
Goods
• Alternative goods
• Other goods that use
some or all of the same
resources as the good in
question
Price
S1
$6
• Beef and leather.
• If the price of beef
decreases, producers will
supply less beef thus
decreasing the supply of
leather.
300
Q Leather
400
Above is the market for the
supply of leather
18. Changes in Relevant
Resources
• Resources that are employed in the
production of the good in question
• Increase in price of resources
$9
S1
S2
500 600
• Results in decrease in supply
• Less of the good is available at all
prices
19. Changes in the Number of
Producers
• As the number of producers change so does the
supply of the product
• A decrease in the number of producers will lead to
a decrease in supply
20. Changes in Producers
Expectations
• Expectation of future prices of resources or their
own product can cause producers to change what
they offer at each individual price
22. • Market
Market Equilibrium
• Includes all the arrangements
used to buy and sell
• Reduce transaction costs
• The place where buyers and
sellers meet to determine price
and quantity
23. Equilibrium
P
• At specific price where:
Quantity demanded
S
Equals
Quantity Supplied
$5
Equilibrium
D
Q
150
24. EQUILIBRIUM SHORTAGE VS
SURPLUS
Surplus
When price > equilibrium price, then quantity supplied > quantity
demanded.
•There is excess supply or a surplus.
•Suppliers will lower the price to increase sales, thereby moving toward
equilibrium.
Shortage
When price < equilibrium price, then quantity demanded > the
quantity supplied.
•There is excess demand or a shortage.
•Suppliers will raise the price due to too many buyers chasing too few
goods, thereby moving toward equilibrium.
26. EQUILIBRIUM- surplus
Extent to which
generation of goods,
services, and resources
(such as capital) exceeds
their consumption is
called surplus.
P
5
Surplus
S
4
3
2
D
1
2
4
6
8
Q
10 12 14 16
Quantity
27. Summary of demand, supply &equilibrium
Change in Change in
Effect on
Effect on
Supply
Demand Equilibrium Equilibrium
Price
Quantity
Increase
Decrease
Decrease
Indeterminate
Decrease
Increase
Increase
Indeterminate
Increase
Increase
Indeterminate Increase
Decrease
Decrease
Indeterminate Decrease
28.
29. References
• Ankit Bist (2011) DEMAND AND SUPPLY at http://www.slideshare.net/AnkitBist/demand-andsupply-10629356?qid=94fd494d-bed6-4867-a65f-f0d7a1e25582&v=default&b=&from_search=4
• Ujjwal Shanu (2013) DEMAND AND SUPPLY at http://www.slideshare.net/ujjmishra1/demandand-supply-28840569?qid=94fd494d-bed6-4867-a65f-f0d7a1e25582&v=default&b=&from_search=8
•
KASBIT (2011) Basic elements of supply and demand, at
http://www.slideshare.net/imranbashir69/basic-elements-of-supply-and-demand
• Jiten Sharma (2012) demand and supply at http://www.slideshare.net/JitenSharma1/demandsupply-market-equilibrium-15222434
• NepDevWiki (2012) 05 price elasticity of demand and supply at
http://www.slideshare.net/NepDevWiki/05-price-elasticity-of-demand-and-supply
