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Demand ad Supply - DEMAND AND SUPPLY Market Any arrangement...

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DEMAND AND SUPPLY Marke t Any arrangement in which goods or service is exchange (can be anywhere). There are 2 sides to a market: Market → 1) Buying Side → Demand is relevant 2) Selling Side → Supply is relevant DEMAND (D, Q) The word demand has a specific meaning in economics. It refers to the willingness and ability of buyers to purchase different quantities of a good at different price during a specific time period. Ability Backed by the purchasing power Want Not backed by the purchasing power There is no demand, and a person is not a buyer, unless there is both willingness and ability to buy. Example: “A” may be willing to but the computer but be unable to pay the price; “B” may be able but unwilling. Neither “A” nor “B” demand a computer. QUANTITY DEMANDED (Q d ) Measure of the number of units of a particular goods that buyers are willing and able to buy at a particular price during a given time period.
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LAW OF DEMAND As the price of a good rises, the quantity demanded of the good falls and as the price of a good falls, the quantity demanded of the good rises, ceteris paribus. P↑ ---> Q d Ceteris Paribus P↓ ---> Q d The quantity demanded is not necessarily the same amount as the quantity actually bought. Sometimes the quantity demanded is greater than the amount of goods available, so the quantity brought is less than the quantity demanded. The quantity demanded is measured as an amount per unit of time. E.g. suppose a person consumes one cup of coffee a day. The quantity of coffee demanded by that person can be expressed: 1 cup per day or 7 cups per weak or 365 cups per year. Without a time dimension, we cannot tell whether a particular quantity demanded is large or small. WHAT DETERMINES BUYING PLANS The amount that consumes plan to buy of any particular good or service depends on many factors. Among the more important ones are: 1) The price of the good 2) The prices of related goods 3) Income 4) Expected future prices 5) Population 6) Preferences DEMAND SCHEDULE It is the numerical tabulation of the quantity demanded of a good that buyers are willing and able to buy at different prices during a given time
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Bread P Q d $5 1 $4 2 $3 5 $2 8 $1 9 DEMAND CURVE A demand curve is the graphical representation of the inverse relationship between price and quantity demanded specified by the law of demand. In short, the demand curve is a picture of the law of demand. Always slope downward from left to right. Moves in opposites direction INDIVIDUAL DEMAND CURVE vs. MARKET DEMAND CURVE Individual Demand Curve Demand Curve for individual for particular good. For each goods we have each demand schedule and demand curve.
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