Impact of Demand

and Supply
Changes on Price:
An Applicative
Analysis

Presented to-
Dr. Brindpreet Kaur
Assistant Professor of
Economics

Submitted by –
Mayuri Vyas
Roll . No. 18014
Group 1
1
 2 INTRODUCTION

Law of Demand

Definition: The law of demand states that other factors being

constant (cetris peribus), price and quantity demand of any good and
service are inversely related to each other. When the price of a
product increases, the demand for the same product will fall.

Law of Supply

The law of supply states that, other factors held constant (cetris
peribus), an increase in price results in an increase in quantity
supplied.
In other words, there is a direct relationship between price and
quantity: quantities respond in the same direction as price changes.

Why Demand and Supply Change?
Factors affecting
change in Demand
 Price of Related Goods
a) substitute goods
b) complementary goods
 Income of the Consumer
 Tastes and Preferences
 Expectations of Change in
the Price of a good in Future
FACTORS AFFECTING
3
CHANGE
Factors affecting
change in Supply
 Innovation of the Technology
 Number of Sellers in the
Market
 Production Costs
 Price of Related Products
 Tax and Subsidies
 4 APPLICATIVE ANALYSIS

1. OIL INDUSTRY
Study by National Bureau of Economic

Research studied the changing trends of

oil prices.
•till 1973 no interruption in price.
•in 1973 - Yom Kippur war
•in 1979 - Iranian Revolution
Reasons Explained for the change in prices
•growth of economy
•increase in demand in our daily lives
•shortage of supply of oil
•increase in world demand especially in the
developing countries like China and India
 5 CASE STUDY NO. 2

2. Americans' Coffee Guzzling Is Pushing Bean

Prices Higher
The Report Given by Bloomberg
“With the U.S. being the largest consumer, any demand growth there will create
massive changes to the demand-supply balance.”

•US has seen 1.5% increase in consumption with growth of only

1.2% global consumption
•in addition to it China, Japan and India have also seen an
increase in consumption
•price for arabica coffee gained up 20%
•price of Robusta coffee gained up 4.2%
•supply from Brazil and other places were reduced
 6 CASE STUDY NO. 3

3. Agricultural Goods
•shortage of a product leads to rise
in price
•oversupply of good leads to fall in
price
•seasons also have a great impact
on the agricultural goods
•during the beginning of the season
due to less supply prices are high
•during the season supply is normal
the prices comes down to normal
•at the end of the season
decreasing supply leads to rise in
price
•prices are highest during off-
season
 7
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