Professional Documents
Culture Documents
DEMAND AND SUPPLY dqs156
DEMAND AND SUPPLY dqs156
Supply and demand are two fundamental economic concepts that govern the behavior of buyers and
sellers in a market.
DEMAND :DEFINITION
Demand is ability and willingness to buy specific quantity of goods at particular of price in a given of
time, ceteris paribus (other factor constant, only price changes)
LAW OF DEMAND
States that the higher price of the product the lower quantity demanded and the of the product
the higher quantity demandedlower price .The relationship between price and quantity demanded
are inverse or negative relationship due to following reasons.Demand curve slopes downward to
right
DETERMINANTS OF DEMAND
The prices of goods or services, the cost of comparable or substitute products and services,
consumer preferences and tastes, future price expectations, changes in real incomes or wealth, the
number of consumers, governmental regulations, climatic changes, and income distribution are the
top ten factors that influence demand.
SUPPLY : DEFINITION
Ability and willingness to sell or produce a particular product & services in a given period of time,
ceteris paribus (other factor constant, only price changes)
LAW OF SUPPLY
States that the higher price of the product the higher quantity supplied and the lower price of the
product the lower quantity supplied (the producer will produce & sell more if the price is high). The
relationship between price and quantity supplied are positive relationship. Represented by the
upward sloping supply curve.
• Individual supply • Shows the relationship between quantities supplied and its
defined as a price.
relationship • Supply curve slopes upward sloping (as figure below)
between quantities
supplied of a good
by single seller and
its price. (As table
below)
DETERMINANTS OF SUPPLY
The phrase "determinants of supply" refers to variables that affect the availability of particular
commodities and services. These variables include the cost of inputs, the technology used by the
company, expectations for the future, the influence of seasons, government policies like taxes to
reduce supply and subsidies to increase supply, and the number of sellers. The elements that directly
influence the supply of an item or service are known as determinants of supply.