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