Demand and suply
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"Demand and Supply" slideshow by Spark Edunation shows the interplay between Demand and Supply and how changes in either of them bring about a change in the equilibrium price and quantity
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Demand and suply
- 1. SPARK EDUNATION Demand and Supply @2012 All rights reserved
- 2. DEMAND CURVE P Represents all combinations of price of a good and quantity demanded by the CONSUMER - Demand Curve is downward sloping - As Price increases, Demand decreases - As Price decreases, Demand increases D - A consumer demands less quantity as the price of a good rises Q SPARK EDUNATION
- 3. SUPPLY CURVE P S Represents all combinations of price of a good and quantity supplied by a producer - Supply Curve is upward sloping - As Price increases, Supply increases - As Price decreases, Supply decreases - A producer supplies more quantity as the price of a good rises Q SPARK EDUNATION
- 4. S - The producer wants the maximum price but consumer is willing to pay the least price E - The price that is finally settled upon is P’ the price at which the demand curve meets the supply curve i.e. E - E is the quilibrium point - P’ is the equilibrium price - Q’ is the equilibrium quantity D - At E, quantity demanded equals quantity supplied Q’ SPARK EDUNATION
- 5. P S P1 At any price above P’ e.g P1 - Quantity supplied Qs > Quantity demded Qd - There is excess supply in the Market P’ - Inventories will increase - Producers will decrease the price back to P’ equilibrium price D Qd Q’ Qs Q SPARK EDUNATION
- 6. P S At any price below P’ e.g P2 - Quantity demanded Qd s > Quantity supplied Qs - There is excess demand in the Market P’ - Inventories will decrease - Producers will increase the price back to P’ P2 equilibrium price D Qs Q’ Qd Q SPARK EDUNATION
- 7. S E1 - Initial equilibrium at E, with price P’ P1 and quantity Q’ E - Demand increases due to other P’ factors than price e.g. income - Demand curve shifts to D1 - New Equilibrium at E1 - Price increases to P1 because supply D1 curve remains same D - Also called as Demand-Pull Inflation Q’ Q1 SPARK EDUNATION
- 8. S1 S - Initial Equilibrium at E with P1 equilibrium price P’ and equilibrium E quantity Q’ P’ - Supply decreases due to other factors than price e.g. increase in cost of raw materials - Supply curve shifts backward to S1 - New equilibrium at E1 D - Equilibrium price increases to P1 - Also called as Cost-push Inflation Q1 Q’