Demand & Supply Analysis 1

Demand & Supply Analysis 1 - DEMAND ANALYSIS Demand is...

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DEMAND ANALYSIS Demand is the amount of goods and services that people are willing and able to buy at a given price and a particular period of time. demand in economics implies an effective demand i.e. the demand that is backed up by ability and willingness to pay as distinct from ordinary need or want which is the desire to possess something. The desire to have a car without the means of purchasing it cannot be regarded as demand in economics. Thus before demand can be become effective demand, there must be need which is backed up by the ability and willingness to spend the means or recourses to acquire such goods and services. Demand is a flow and has a time dimension. The Law of Demand The law of demand portrays a relationship between the price of commodity and the demand for such commodity at a particular period of time. The law states that the higher the price of commodity the lower the demand for such commodity. Demand Schedule It is a tabular arrangement of values that shows the quantity of commodity that is demanded at different prices. Individual Demand Schedule and Market Demand Schedule Individual Demand Schedule Shows the quantity demanded by individual say Mr. Amoo at different prices Market Demand Schedule Shows the aggregate demand for a commodity in the market and it can obtain by combining all demand schedule by individuals in that market. Thus, a market demand schedule could be described as the sum of all the quantities purchased by each consumer at varying prices. Price (N) Mr. Amoo Foluke Obina Market (Individual) (Individual) Demand 300 25 15 5 45 250 30 20 10 60 200 35 25 15 75 150 40 30 20 90 100 45 35 25 105 50 50 40 30 120 Individual Demand Curve and Market Demand Curve An individual demand curve is a graphical representation of individual demand schedule and a market demand curve also implies a graphical representation of market demand schedule 1
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Market Demand 45 60 75 90 105 120 0 20 40 60 80 100 120 140 0 100 200 300 400 Price (Naira) Qty Demanded A single point on the demand curve indicates a single price quantity relation between the quantity demanded and the price. since the quantity and the price are inversely related, the demand curve therefore slopes downward from left to right and this characteristics is known as the \law of Downward-Sloping Demand" and this holds for al normal goods Types of Demand 1. Complementary demand This is a type of demand that applies to two gods that are jointly demanded. An increase in demand for one (say commodity Y) leads to an increase in demand for the other (say X). For example, an increase in demand for cars will enhance increase in demand for petrol. 2. Competitive Demand The Demand is said to be competitive when an increase in demand for one commodity (X) leads to a decrease in demand for other commodity (Y). This is mostly applied to commodities that are substitutes to each other. If X and Y are good substitutes, like tea and coffee, meat and fish, a demand for one would necessitate a decrease in demand for the other.
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This note was uploaded on 12/22/2009 for the course ECO ECO 111 taught by Professor Ogunirolai.o during the Fall '09 term at Covenant.

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Demand & Supply Analysis 1 - DEMAND ANALYSIS Demand is...

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