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Chapter 2 - Demand and Supply

The document discusses the theory of demand and supply. It explains the laws of demand and supply, how demand and supply curves are derived, and factors that can cause shifts in demand and supply curves.

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zatty kim
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101 views20 pages

Chapter 2 - Demand and Supply

The document discusses the theory of demand and supply. It explains the laws of demand and supply, how demand and supply curves are derived, and factors that can cause shifts in demand and supply curves.

Uploaded by

zatty kim
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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THEORY OF DEMAND

AND SUPPLY
 A desire to buy good or services accompanied
by ability and willingness to pay
 LAW OF DEMAND
If a product’s price increases, the quantity
demanded for the good will fall and if the
price decrease, the quantity demanded for
the good will increases(c.p)
Demand schedule
shows the quantity demanded of a product at
a various price levels

Demand curve
shows the negative relationship between price
and quantity demanded(downward sloping)
Exhibit 1 Demand Schedule and Demand Curve

(a)

(b)

Arnold Economics, 5e / Ch. 3


Supply, Demand, and Price: The
Theory
©2001 South-Western College
Publishing 4
 INDIVIDUAL DEMAND
demand curve of an individual or consumer
or a buyer
 MARKET DEMAND
the total quantity demanded by all buyers in
the market
Exhibit 2 Deriving a Market Demand Schedule and
a Market Demand Curve

(a)

Arnold Economics, 5e / Ch. 3


Supply, Demand, and Price: The (b)
Theory
©2001 South-Western College
Publishing 6
 CHANGES IN QUANTITIY DEMANDED
-cause by the price of the product
-movement along the same demand curve

 CHANGES IN DEMAND
-cause by the changes in other factors
-shift of the demand curve
1) Number of buyers
2) Tastes and preferences
3) Income
4) Buyers’ expectations of future prices
5) Prices of related goods
-Complementary goods
-Substitute goods
Exhibit 3 Shifts in the Demand Curve

Arnold Economics, 5e / Ch. 3


Supply, Demand, and Price: The
Theory
©2001 South-Western College
Publishing 9
Exhibit 5 A Change in Demand versus a Change
in Quantity Demanded

Arnold Economics, 5e / Ch. 3


Supply, Demand, and Price: The
Theory
©2001 South-Western College
Publishing 10
Exhibit 4 Substitutes and Complements

Arnold Economics, 5e / Ch. 3


Supply, Demand, and Price: The
Theory
©2001 South-Western College
Publishing 11
 The quantity of goods that is offered for sale
at all possible prices

 LAW OF SUPPLY
If the products’ price increases, the quantity
supplied for the good will increase and if the
price is decrease, the quantity supplied will
also decrease
 SUPPLY SCHEDULE
shows the quantity offered for sale by an
individual sellers at a various price levels

 SUPPLY CURVE
a curve that shows a direct relationship
between price and quantity supplied and vice
versa.
Exhibit 8 A Supply Curve

Arnold Economics, 5e / Ch. 3


Supply, Demand, and Price: The
Theory
©2001 South-Western College
Publishing 14
 INDIVIDUAL SUPPLY
- the supply by individual seller

 MARKET SUPPLY
- total supply of all sellers
Exhibit 10 Deriving a Market Supply Schedule and a
Market Supply Curve

(a)

Arnold Economics, 5e / Ch. 3


Supply, Demand, and Price: The (b)
Theory
©2001 South-Western College
Publishing 16
 CHANGE IN QUANTITY SUPPLIED
- cause by changes in the price of the
product
- movements along the same supply curve

 CHANGE IN SUPPLY
-cause by changes in factors other than
price
-Shifts by the supply curve
Exhibit 11 Shifts in the Supply Curve

Arnold Economics, 5e / Ch. 3


Supply, Demand, and Price: The
Theory
©2001 South-Western College
Publishing 18
Exhibit 12 A Change in Supply versus a Change
in Quantity Supplied

Arnold Economics, 5e / Ch. 3


Supply, Demand, and Price: The
Theory
©2001 South-Western College
Publishing 19
1) Number of sellers
2) Technology
3) Resources prices
4) Sellers’ expectations of future prices
5) Taxes and subsidies

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