SUPPLY AND DEMAND

AIRA JOY PON-AN ANGELICA MOPAL

Objectives 🎁 To know what is Supply and Demand.

🎁 To know why changes occur in Supply and Demand Curve

🎁 To know what is Market Equilibrium

DEMAND 🎁 “Demand” means all the amounts people

will want to buy at all possible different prices, everything else unchanged; it is the relationship between price and how much people want to buy.

🎁 Demand is a list of quantities at different prices and is illustrated by the demand curve.

🎁 The relationship between the quantity demand and the price of a good when all other influences on buying plans remain the same.

🎁 Individual Demand- The demand of an

individual consumer. 🎁 Market Demand

- Sum of individual demands of all consumers in the market.

🎁 The amount of a good, service, or resource that people are willing and able to buy during a specified period at a specified price.

🎁 It depends on the price of a good or service in the marketplace, regardless of whether that market is in equilibrium.

Kinds of Demand

Quantity Demand

Laws of Demand 🎁 It states that there is a negative, or inverse,

relationship between price and the quantity of a good demanded and its price.

🎁 Price increases Quantity Demanded decreases

🎁 Price decreases Quantity demanded increases

Demand Schedule 🎁 A list of the quantities demanded at each different

price when all the other influences on buying plans remain the same.

🎁 is a table of the quantity demanded of a good at different price levels. Thus, given the price level, it is easy to determine the expected quantity demanded.

Demand Curve 🎁 A graph of the

relationship between the quantity demanded of a good and its price when all other influences on buying plans remain the same; i.e. the graph of the good’s own-price and how much people want to buy at each own-price.

🎁 Demand Curve goes down.

PRICE (PER

CALL)

QUANTITY DEMANDED (CALLS PER

MONTH)$ 0 30

0.50 253.50 77.00 3

10.00 115.00 0

ANNA'S DEMAND SCHEDULE FOR

TELEPHONE CALLS

Determinants of Demand

🎁 Changes in consumer income

🎁 Changes in prices of related goods

🎁 Changes in consumer expectations

🎁 Changes in the number or composition of consumers

🎁 Changes in consumer tastes

Changes in

Demand

🎁 A change in the quantities that people plan to buy [at various prices] when any influence other than the own-price of the good changes. In other words, a shift or change in the relationship between the price of the good and how much of it people want to buy.

1. When demand decreases, the demand curve shifts

leftward from D0 to

D1.

2.When demand increases, the demand curve shifts

rightward from D0 to D2.

When demandchanges, thedemand curve shifts.

Supply 🎁 Producer’s side

🎁 A relation between the price of a good and the quantity that the producers are willing and able to offer for sale during a given period, other things constant.

🎁 Supply is a list of quantities at different prices and is illustrated by the supply curve, just like demand and the demand curve.

🎁 Quantity Supplied represents the number of units of a product that a firm would be willing and able to offer for sale at a particular price during a given time period.

🎁 Individual Supply

- The supply of an individual producer.

🎁 Market Supply

- The sum of individual supplies of all producers in the market.

Kinds of Supply

Quantity Supplied

Laws of Supply 🎁 The quantity of a good supplied during a given period

is usually directly related to the price of the good

🎁 Increase in price leads to increase in quantity supplied; decrease in price leads to decrease in quantity supplied.

🎁 Creates upward sloping supply curve

🎁 A graph of the relationship between the quantity supplied and the good’s own-price when all other influences on selling plans remain the same.

🎁 A list of the quantities supplied at each different price when all other influences on selling plans remains the same.

Supply Schedule

Supply Curve

Determinants of Supply Curve

🎁 Changes in technology

🎁 Changes in prices of relevant resources

🎁 Changes in the prices of alternative goods

🎁 Changes in Producer Expectations

🎁 Changes in the number of producers

Changes in Supply

🎁 When supply shifts to the right, supply increases. This causes quantity supplied to be greater than it was prior to the shift, for each and every price level.

🎁 Caused by changes in the determinants to the supply curve.

When supply changes, the supply curve shifts.

1. When supply decreases, the supply curve shifts leftward

from S0 to S1.2. When supply

increases, the supply curve shifts rightward from S0 to S2.

MARKET 🎁 A market is any

arrangement that bring buyers and sellers together.

EQUILIBRIUM 🎁 Is the condition that exists when quantity supplied and quantity demanded are equal.

Market Equilibrium 🎁 When the quantity demanded equals the

quantity supplied-when buyers’ and sellers’ plans are consistent.

Equilibrium Price

🎁 The price at which the quantity demanded equals the quantity supplied.

🎁 The quantity bought and sold at the equilibrium price.

Equilibrium Quantity

This figure shows theequilibrium price andequilibrium quantity

Market equilibrium is at the intersection of the demand curve and the supply curve.

Changes in Equilibrium Point

🎁 Law of market forces

-When there is a shortage, the price tends to rise.

-When there is a surplus, the price tends to fall.

🎁 Surplus or Excess Supply

-The quantity supplied exceeds the quantity demanded.

🎁 Shortage or Excess Demand

-The quantity demanded exceeds the quantity supplied.

This figure shows theeffects of an increase indemand.1. An increase in demand shifts the demand curve rightward.

2. The price rises to restore market equilibrium.3. Quantity supplied increases along the supply curve.4. Equilibrium quantity increases.

This figure shows theeffects of a decrease in demand.1. A decrease in demand shifts the demand curve leftward.

2. The price falls to restore market equilibrium.3. Quantity supplied decreases along the supply curve.4. Equilibrium quantity decreases.

Summarization Demand means all the amounts people will want to buy at all possible different prices while Supply refers to the amount of a product that producers and firms are willing to sell at a given price. They are both graphed using the Demand and Supply Curve. Shifting Happens if Demand or Supply Increases or Decreases. Market Equilibrium is when Supply and Demand are balanced and in the absence of external influences the values of economic variables will not change.