DEMAND AND SUPPLY factors like price of the commodity, taste and

preference and fashion etc. remain constant.

DEMAND
CROSS DEMAND
 Demand for any commodity at a given price is
the quantity demanded of it which will be  It refers to the different quantities of a
bought per unit of time at that price. commodity that will be demanded by the
consumer per unit of time at different prices
INDIVIDUAL DEMAND of related commodity provided that all other
factors remain constant.
 The quantity of a good or service that an
individual or firm stands ready to buy at
various prices at a given time DEMAND SCHEDULE AND DEMAND CURVE
MARKET DEMAND DEMAND SCHEDULE
 The sum of the individual demands in the A table showing the various quantities of a good or
marketplace. service that will be demanded at various prices

PRICE PER CUP OF TEA NO. OF CUPS OF TEA

(Rs) DEMANDED
EFFECTIVE DEMAND 7 1
6 2
In terms of economics the ‘Effective Demand’ is the
5 3
demand that affects the supply and prices of the 4 4
commodity in the market. 3 5
2 6
There are three essential elements in effective
1 7
demand:

 The person has need or desire to possess the

DEMAND CURVE
commodity.
A curve that indicates the number of units of a good
 He has sufficient means to purchase those
or service that consumers will buy at various prices at
commodities i.e. enough purchasing power.
a given time
 He is willing to sacrifice means to purchase
that commodity.

TYPES OF DEMAND

PRICE DEMAND

 It refers to various quantities of a commodity

that consumer demands per unit of time at
different prices provided that other factors
like income of the consumer, taste and
preference, fashion and price of related
commodities remain constant.

INCOME DEMAND

 It refers to various quantities of a commodity

that consumer will buy per unit of time at
different levels of income provided that other
 LAW OF DEMAND  Change in demand

 The quantity purchased of a good or  A change in the amounts of the

service is inversely related to the price, all product that would be purchased
other things being equal (ceteris paribus) at the same given prices; a shift of
the entire demand curve
 Price changes lead to qty demanded
changing.......

 Represented by movements along MOVEMENT IN DEMAND CURVE

demand curve.
EXTENSION IN DEMAND
 Inverse relationship between price and
 The quantity demanded of the commodity
quantity demanded gives rise to a
is increased due to reduction in its price,
downward- sloping demand curve.
Ceteris Paribus.

CONTRACTION IN DEMAND

 The quantity demanded of the product is

reduced due to increase in the price of
commodity.

MOVEMENT ALONG THE DEMAND CURVE

EXCEPTION TO THE LAW OF DEMAND

 The Giffen Paradox

 Commodities of Status Symbol
 Small Priced Commodity
 Speculation
 Necessities of Life
 Habit forming goods SHIFT IN DEMAND CURVE

INCREASE IN DEMAND

 The demand for a commodity rises due to

change in some factor other than its price.
CHANGES IN QUANTITY DEMANDED AND IN
DEMAND DECREASE IN DEMAND

 Change in quantity demanded  When the demand for a commodity

reduces due to change in some factor
 Movement along the demand
other than its price.
curve that occurs because the
price of the product has changed
 SHIFTS IN DEMAND CURVE SUPPLY
 The total quantities of a good or service that
sellers stand ready to sell at different prices
at a given time

INDIVIDUAL SUPPLY

 Quantities offered for sale at various prices

at a given time by an individual seller

MARKET SUPPLY

 Sum of the individual supply schedules in

the marketplace

INCREASE IN DEMAND

LAW OF SUPPLY

 Other things remaining the same, the higher

the price of a good, the greater is the
quantity supplied; and
 The lower the price of a good, the smaller is
the quantity supplied.
 The law of supply results from the general
tendency for the marginal cost of producing
a good or service to increase as the quantity
DECREASE IN DEMAND
produced increases
 Producers are willing to supply a good only
if they can at least cover their marginal cost
of production.

SUPPLY SCHEDULE

A table showing the various quantities of a good or

service that sellers will offer at various prices at a
given time
DETERMINANTS OF DEMAND

 Changes in income
SUPPLY CURVE
 Higher incomes increase in demand A line showing the number of units of a good or
 Lower incomes  decrease in
service that will be offered for sale at different
demand
prices at a given time
 Changes in tastes and preferences
 Change in consumer expectations
 Changes in the prices of other goods
 Substitutes  Increase in the price of
substitutes  increase in demand
 Complements  Increase in the price of
complements  decrease in demand INCREASE IN SUPPLY
 DEMAND, SUPPLY, AND MARKET PRICES FOR
INTERNET TIME

DECREASE IN SUPPLY

SURPLUS OF INTERNET TIME

DETERMINANTS OF SUPPLY

 Changes in the cost of resources

 Increase in the cost of resources 
decrease in supply
 Technology
 Improvements  increase in supply
SHORTAGE OF INTERNET TIME
 Expectations of future prices (Shift to the
right)
 Prices of related products

MARKET EQUILIBRIUM

A state whereby the forces of market demand and

market supply exactly balance each other and there
is no tendency for change.

EQUILIBRIUM PRICE

The price at which the quantity demanded equals

the quantity supplied.
 CHANGES IN EQUILIBRIUM PRICE & QUANTITY

 Once equilibrium is attained, there is no

tendency for change, unless demand, supply
or both market forces change.
 Demand & supply change when there is a
change in determinants of demand and/or
supply.

CHANGE IN BOTH DEMAND & SUPPLY AT THE

SAME TIME

 the effect on only either P or Q can be

determined straight away

 the impact on the other variable cannot be

determined ,

 unless given more information on the size of

the relative shifts

WHAT HAPPENS WHEN

Demand and supply increase simultaneously?

The equilibrium qty will definitely increase, but

whether the equilibrium price will increase or
decrease depends on how much demand shifts
relative to supply