DEMAND AND SUPPLY factors like price of the commodity, taste and
preference and fashion etc. remain constant.
DEMAND
CROSS DEMAND
Demand for any commodity at a given price is
the quantity demanded of it which will be It refers to the different quantities of a
bought per unit of time at that price. commodity that will be demanded by the
consumer per unit of time at different prices
INDIVIDUAL DEMAND of related commodity provided that all other
factors remain constant.
The quantity of a good or service that an
individual or firm stands ready to buy at
various prices at a given time DEMAND SCHEDULE AND DEMAND CURVE
MARKET DEMAND DEMAND SCHEDULE
The sum of the individual demands in the A table showing the various quantities of a good or
marketplace. service that will be demanded at various prices
PRICE PER CUP OF TEA NO. OF CUPS OF TEA
(Rs) DEMANDED
EFFECTIVE DEMAND 7 1
6 2
In terms of economics the ‘Effective Demand’ is the
5 3
demand that affects the supply and prices of the 4 4
commodity in the market. 3 5
2 6
There are three essential elements in effective
1 7
demand:
The person has need or desire to possess the
DEMAND CURVE
commodity.
A curve that indicates the number of units of a good
He has sufficient means to purchase those
or service that consumers will buy at various prices at
commodities i.e. enough purchasing power.
a given time
He is willing to sacrifice means to purchase
that commodity.
TYPES OF DEMAND
PRICE DEMAND
It refers to various quantities of a commodity
that consumer demands per unit of time at
different prices provided that other factors
like income of the consumer, taste and
preference, fashion and price of related
commodities remain constant.
INCOME DEMAND
It refers to various quantities of a commodity
that consumer will buy per unit of time at
different levels of income provided that other
LAW OF DEMAND Change in demand
The quantity purchased of a good or A change in the amounts of the
service is inversely related to the price, all product that would be purchased
other things being equal (ceteris paribus) at the same given prices; a shift of
the entire demand curve
Price changes lead to qty demanded
changing.......
Represented by movements along MOVEMENT IN DEMAND CURVE
demand curve.
EXTENSION IN DEMAND
Inverse relationship between price and
The quantity demanded of the commodity
quantity demanded gives rise to a
is increased due to reduction in its price,
downward- sloping demand curve.
Ceteris Paribus.
CONTRACTION IN DEMAND
The quantity demanded of the product is
reduced due to increase in the price of
commodity.
MOVEMENT ALONG THE DEMAND CURVE
EXCEPTION TO THE LAW OF DEMAND
The Giffen Paradox
Commodities of Status Symbol
Small Priced Commodity
Speculation
Necessities of Life
Habit forming goods SHIFT IN DEMAND CURVE
INCREASE IN DEMAND
The demand for a commodity rises due to
change in some factor other than its price.
CHANGES IN QUANTITY DEMANDED AND IN
DEMAND DECREASE IN DEMAND
Change in quantity demanded When the demand for a commodity
reduces due to change in some factor
Movement along the demand
other than its price.
curve that occurs because the
price of the product has changed
SHIFTS IN DEMAND CURVE SUPPLY
The total quantities of a good or service that
sellers stand ready to sell at different prices
at a given time
INDIVIDUAL SUPPLY
Quantities offered for sale at various prices
at a given time by an individual seller
MARKET SUPPLY
Sum of the individual supply schedules in
the marketplace
INCREASE IN DEMAND
LAW OF SUPPLY
Other things remaining the same, the higher
the price of a good, the greater is the
quantity supplied; and
The lower the price of a good, the smaller is
the quantity supplied.
The law of supply results from the general
tendency for the marginal cost of producing
a good or service to increase as the quantity
DECREASE IN DEMAND
produced increases
Producers are willing to supply a good only
if they can at least cover their marginal cost
of production.
SUPPLY SCHEDULE
A table showing the various quantities of a good or
service that sellers will offer at various prices at a
given time
DETERMINANTS OF DEMAND
Changes in income
SUPPLY CURVE
Higher incomes increase in demand A line showing the number of units of a good or
Lower incomes decrease in
service that will be offered for sale at different
demand
prices at a given time
Changes in tastes and preferences
Change in consumer expectations
Changes in the prices of other goods
Substitutes Increase in the price of
substitutes increase in demand
Complements Increase in the price of
complements decrease in demand INCREASE IN SUPPLY
DEMAND, SUPPLY, AND MARKET PRICES FOR
INTERNET TIME
DECREASE IN SUPPLY
SURPLUS OF INTERNET TIME
DETERMINANTS OF SUPPLY
Changes in the cost of resources
Increase in the cost of resources
decrease in supply
Technology
Improvements increase in supply
SHORTAGE OF INTERNET TIME
Expectations of future prices (Shift to the
right)
Prices of related products
MARKET EQUILIBRIUM
A state whereby the forces of market demand and
market supply exactly balance each other and there
is no tendency for change.
EQUILIBRIUM PRICE
The price at which the quantity demanded equals
the quantity supplied.
CHANGES IN EQUILIBRIUM PRICE & QUANTITY
Once equilibrium is attained, there is no
tendency for change, unless demand, supply
or both market forces change.
Demand & supply change when there is a
change in determinants of demand and/or
supply.
CHANGE IN BOTH DEMAND & SUPPLY AT THE
SAME TIME
the effect on only either P or Q can be
determined straight away
the impact on the other variable cannot be
determined ,
unless given more information on the size of
the relative shifts
WHAT HAPPENS WHEN
Demand and supply increase simultaneously?
The equilibrium qty will definitely increase, but
whether the equilibrium price will increase or
decrease depends on how much demand shifts
relative to supply
