DEMAND & SUPPLUY
FIRST: DEMAND
The the quantity that buyers are willing (and able) to purchase
Quantity at a particular price
Demanded
Quantity demanded is negatively related to price, the quantity
demanded falls when the price rises, and the quantity demanded
increase when the price falls.
The law of demand results from
- Substitution effect
The law - Income effect
of a) Substitution effect
Demand When the relative price (opportunity cost) of a good or service
rises, people seek substitutes for it, so the quantity demanded
of the good or service decreases.
Income effect
b) Income effect
When the price of a good or service rises relative to income,
people cannot afford all the things they previously bought, so
the quantity demanded of the good or service decreases
Table that shows the relationship between the price of a good and the
quantity demanded as shown in the table.
Price of Ice Cream Quantity of Demanded
0.5 25
1 20
1.5 15
2 10
The demand
Schedule 2.5 5
- If price increase from 0.5$ to 1$ , the Qd decrease from 25 to 20
- If price decrease from 1$ to 0.5$, the Qd increase from 20 to 25.
(related negative between price and Qd)
Shows the quantity demanded at different prices. (A Movement along
the Demand Curve) or (change in quantity demanded)
***A movement from point to another on the same demand curve is
(change in quantity demanded).
A Demand
Curve
2
- If price decrease , the Qd increase
- If price increase, the Qd decrease.
(related negative between price and Qd)
A rise in the price, other things remaining the same, brings a decrease
in the quantity demanded and a movement along the demand curve.
3
The relationship between another factors and the quantity with fixed
price ,Of course, the price of good is not the only factor that impacts
to buy
Six main factors that change demand are
The prices of related goods
Expected future prices
Income
Expected future income
Population
Preferences or consumer's tastes
1- Prices of Related Goods
- A substitute is a good that can be used in place of another good.
- A complement is a good that is used in conjunction with another
good.
***When the price of substitute for (good A) rises or when the price
of a complement of (good A) falls, the demand for (good A) increases.
A change
2- Expected Future Prices
in demand
If the price of a good is expected to rise in the future, current
or
demand for the good increases and the demand curve shifts
Shift of
rightward.
the
3- Income
Demand
When income increases, consumers buy more of most goods and the
curve
demand curve shifts rightward.
- A normal good is one for which demand increases as income
increases.
- An inferior good is a good for which demand decreases as income
4
increases.
4- Expected Future Income
When income is expected to increase in the future, the demand might
increase now.
5- Population
The larger the population, the greater is the demand for all goods.
6- Preferences
People with the same income have different demands if they have
different preferences.
When demand increases, the demand curve shifts rightward.
When demand decreases, the demand curve shifts leftward
