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Demand and Supply

Demand is the consumer's desire to purchase goods and services at specific prices, with the law of demand indicating that higher prices lead to lower quantities demanded. Factors influencing demand include product price, consumer income, tastes, prices of related goods, future price expectations, and demographics. Supply, on the other hand, refers to the total amount of goods available, with the law of supply stating that higher prices result in increased supply, and changes in supply can occur due to factors like input prices, technology, number of sellers, expectations, and government policies.

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18 views5 pages

Demand and Supply

Demand is the consumer's desire to purchase goods and services at specific prices, with the law of demand indicating that higher prices lead to lower quantities demanded. Factors influencing demand include product price, consumer income, tastes, prices of related goods, future price expectations, and demographics. Supply, on the other hand, refers to the total amount of goods available, with the law of supply stating that higher prices result in increased supply, and changes in supply can occur due to factors like input prices, technology, number of sellers, expectations, and government policies.

Uploaded by

omarfaruk.residential
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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What Is Demand?

Demand is an economic concept that relates to a consumer's desire to


purchase goods and services and willingness to pay a specific price for
them. An increase in the price of a good or service tends to decrease the
quantity demanded.

Supply is a fundamental economic concept that describes the total amount of a specific good or
service that is available to consumers.

The law of demand


states that a higher price leads to a lower quantity demanded and that a
lower price leads to a higher quantity demanded. Demand curves and
demand schedules are tools used to summarize the relationship between
quantity demanded and price

A demand curve
A demand curve is a graph that shows the relationship between the price of
a good or service and the quantity demanded within a specified time frame.
Demand curves can be used to understand the price-quantity relationship
for consumers in a particular market, such as corn or soybeans.
What is the demand schedule in economics?

In economics, a demand schedule is a table that shows the quantity demanded of a


good or service at different price levels. A demand schedule can be graphed as a
continuous demand curve on a chart where the Y-axis represents price and the X-axis
represents quantity.
What is change in demand ?

A change in demand represents a shift in consumer desire to purchase a


particular good or service, irrespective of a variation in its price. The change
could be triggered by a shift in income levels, consumer tastes, or a
different price being charged for a related product.

What is shift in demand ?


Shift in demand is a representation of a change in the quantity of a good
or service demanded at every price level due to various economic factors.

What are the Six main factors which bring changes in demand?

1. Price of product
2. Consumer Income
3. Tastes and Preferences
4. Price of Related Goods
5. Expectations of Future Prices
6. Population and Demographics

Price of product:

• The most basic factor influencing demand is the price of the product or
service. Generally, there is an inverse relationship between the price of a
good and the quantity demanded. As the price decreases, demand tends to
increase and price increase ,demand decrease.

Consumer Income:

When consumers have higher incomes, they tend to spend more on goods and
services, leading to an increase in demand. Conversely, a decrease in income may
result in decreased demand.

Tastes and Preferences:


Changes in fashion, trends, or consumer preferences can lead to shifts in demand for certain
products or services. Effective marketing strategies can also influence consumer preferences.

Price of Related Goods:

The prices of related goods can also impact demand. There are two types of
related goods: substitutes and complements.

Substitutes: If the price of a substitute for a good decreases, the demand for the
original good may decrease.

Complements: If the price of a complement for a good decreases, the demand for
the original good may increase.

Expectations of Future Prices:

Consumer expectations about future prices can influence their current purchasing
decisions. If consumers expect prices to rise in the future, they may choose to buy
more now, increasing current demand.

Population and Demographics:

Changes in population size and demographics (age, gender, income distribution,


etc.) can have a significant impact on demand.

What is supply ?
Supply is a fundamental economic concept that describes the total amount of a specific good or
consumers An example of this is the total amount of
service that is available to
apples a farmer is able to produce and offer to the market.

What Is the Law of Supply?


The law of supply is a basic economic concept. It states that an
increase in the price of goods or services results in an increase in their
supply. Supply is defined as the quantity of goods or services that
suppliers are willing and able to provide to customers.

What is supply curve?


supply curve in economics, graphic representation of the relationship
between product price and quantity of product that a seller is willing and able
to supply. Product price is measured on the vertical axis of the graph and
quantity of product supplied on the horizontal axis. the supply curve is drawn
as a slope rising upward from left to right, as the price of a commodity
increases in the market, the amount supplied increases)

What is a supply schedule?

A supply schedule is a table that shows the quantity supplied at each price. A supply
curve is a graph that shows the quantity supplied at each price.

why change in supply in economics ?


In economics, the term "change in supply" refers to a shift in the entire supply
curve for a particular good or service. The supply curve represents the
quantity of a good that producers are willing and able to sell at different prices.
Changes in supply are caused by various factors, and they can be classified
into two main categories: a change in the determinants of supply and a
change in the quantity supplied.

Change in Determinants of Supply:

Input Prices: If the prices of inputs (such as raw materials, labor, or


technology) used in the production process change, it can affect the cost of
production and, subsequently, the quantity of the good that producers are
willing to supply.
Technology: Advances in technology can lead to increased efficiency in
production, lowering costs and potentially increasing the quantity that
suppliers are willing to offer at various price levels.
Number of Sellers: The entry or exit of producers in a market can impact the
overall supply. An increase in the number of sellers can lead to an increase in
supply, while a decrease can lead to a decrease in supply.
Expectations: If producers expect future changes in market conditions, such
as a price increase or decrease, it can influence their current supply
decisions.
Government Policies: Changes in government policies, such as taxes,
subsidies, or regulations, can affect production costs and, consequently, the
quantity supplied.

Equilibrium is the state in which market supply and demand balance


each other, and as a result prices become stable. Generally, an over-
supply of goods or services causes prices to go down, which results in
higher demand—while an under-supply or shortage causes prices to
go up resulting in less demand.

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