Demand & Supply
Analysis
Michael Parker
H.L. Ahuja
Mohammad Saiful Islam
Demand
The demand for a commoditity is the amount of
it that a consumer wills to or will buy at a
certain price, in a certain place and at a given
time.
If one demands something, he
1.
Wants it,
2.
Can affort it.
3.
Has made a definite plan to buy it.
All these three together constitute demand for a
certain good.
The basic economic phenomenon
of unlimited
need of a consumer will be converted into his
want for a certain good and his ability to pay
for it will create the demand for the goods at a
2
Law of
Demand
“
Other things remaining the same, if
price
of
a
commodity
falls,
the
quantity demanded for it will rise,
and if price of the commodity rises,
its quantity demanded will decline.
Thus,
the inverse relationship between
price and quantity demanded is the
law of demand, ceterus paribus.
4
Demand Schedule and Demand
Curve
Demand
Curve
shows
the
relationship between the quantity
demanded of a good and its price
when
all
other
influences
on
consumers’
planned
purchases
remain the same.
5
Price($ per shirt)
Quantity Demanded
100
5
80
6
60
10
40
15
20
20
Why does DC slope downward?
Because of law of demand, demand curve slopes downward
to the right.
Why does Law of Demand exist?
Substitution effect:
When the relative price of a good or
service rises, people seek
substitutes for it, so the
quantity demanded of the good or
service decreases.
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.
Law of Diminishing marginal utility.
6
Demanded Vs. Change in
Demand
When any factor that influences buying plan changes,
other than the price of the good, there is a change in
demand but not change in quantity demanded.
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- Spring '15
