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Meaning of demand
Demand may be defined as the
amount of a commodity
purchased by a person at a
given point of time and at a
given price.
It includes:
1. A desire to get a commodity
2. A means to buy it.
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Meaning of demand
Cont….
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Demand & Demand Curve
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Demand Curve
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Types of demand
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Law of Demand
Holding all other things constant
(ceteris paribus), there is an
inverse relationship between the
price of a good and the quantity of
the good demanded per time
period.
The Law of Demand results from
a substitution effect
an income effect
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Explanation of the Law
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Individual Demand Curve
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Market Demand Curve
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From Individual to Market
Demand Curve
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Demand function
DX=f(PX,P,Y,T,E etc.)
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Change in quantity
demanded Vs. Change in
Demand
A Change in the
Quantity
Demanded Versus
a Change in
Demand
This figure
illustrates the
distinction
between a change
in demand and a
change in the
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quantity
Movements along the
Demand Curve
When the price of
the good changes
and everything
else remains the
same, there is a
change in the
quantity
demanded and a
movement along
the demand
curve. Tanu Kathuria 21
Shifts in the Demand
Curve
When one of the
other factors that
influence buying
plans changes,
there is a change
in demand and a
shift of the
demand curve.
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Common Confusions
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Quantity Supplied
Definition:
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Example: Supply of CD-Rs
Price(P) Quantity(QS)
$ 0.50 0
1.00 3 Supply Schedule
1.50 4
2.00 5
2.50 6
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The “Law” of Supply
The higher the
price of the
good, the more
producers will
be willing to
supply (QS),
ceteris paribus
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A Change in Supply
When any factor that influences selling plans other than
the price of the good changes, there is a change in
supply of that good. The quantity of the good that
producers plan to sell changes at each and every price,
so there is a new supply curve.
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Shifts in the Supply Curve
Price of inputs
Price of other goods produced
Expected future prices
# Suppliers
Technology
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Quantity Supplied Vs.
Change in Supply
A Change in the
Quantity Supplied
Versus a Change
in Supply
Figure illustrates
the distinction
between a change
in supply and a
change in the
quantity supplied.
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Movement along the
Supply Curve
When the price of
the good changes
and other
influences on
selling plans
remain the same,
there is a change
in the quantity
supplied and a
movement along
the supply curve.
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Shift in Supply Curve
When one of the
other factors that
influence selling
plans changes,
there is a change
in supply and a
shift of the supply
curve.
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Market Equilibrium
Equilibrium is a situation in which opposing
forces balance each other. Equilibrium in a
market occurs when the price balances the
plans of buyers and sellers.
A Price-Quantity Combination at
which
there is no shortage or surplus
S=D
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