Demand and Supply Demand a, Individual demand | «An individual demand for good refers to the quantities of that good a buyer is willing and able to buy at different prices over a period of time, other factors being constant = Demand = want + purchasing power = willingness to buy + ability to buy - Demand schedule Price ($) Quantity demanded 5 7 6 6 Z 5 b. Quantity demanded = The quantity demanded of a good refers to the quantity that a buyer is willing and able to buy at a particular price over a period of time. ** Remarks: 1. Demand # Quantity demanded Quantity demanded The quantities a buyer is willing and | The quantity a buyer is willing and able to buy at different prices over a _| able to buy at a particular price over a period of time (the whole demand _| period of time (a point) Demand curve) 2. Quantity demanded (plan to buy) # quantity actually bought 3. We need to specify the time period when deciding the demand for a good 4. Ceteris paribus (other factors being constant) When we hold the other factors that affect the quantity demanded constant, the only factor affecting the quantity demanded is the price, so we can see the effect of a price change on quantities demanded in a demand curve. i feEaeT Aliz+ Individual demand to market demand set ‘indi tities deman' led of The market demand schedule is obtained bY finding the ua” all individual buyers at different prices it 1 dule is called horizontal ; iia izontal summation tained via the hori: ga market demand s The process of derivini ve is ol summation. The market demand cur of all individual demand curves |. Law of demand ‘A demand curve is downward sloping The law of demand states that the lower (higher) the price of a good, the other factors being greater (smaller) its quantity demanded, vice versa, constant., (—SE32#%) Quantity demanded and the price of a good are negatively relatedSupply of that good a buyer is a. Individual supply of time, other factors An individual supply of a good refers to the quantities willing and able to sell at different prices over a period being constant Supply = willingness to sell + ability to sell - Supply schedule Price ($) Quantity supplied 5 8 9 6 7 10 b, Quantity supplied = The quantity supplied of a good refers to the quantity t able to sell at a particular price over a period of time. hat a seller is willing and ** Remarks: 5. Supply # Quantity supplied [Supply Quantity supplied The quantities a seller is willing and —_| The quantity a seller is willing and able able to sell at different prices over a _| to sell at a particular price over a period of time (the whole supply period of time (a point) curve) 6. Quantity supplied (plan to sell) # quantity actually sold 7. We need to specify the time period when deciding the supply of a good 8. Ceteris paribus (other factors being constant) ~ When we hold the other factors that affect the quantity supplied constant, the only factor affecting the quantity supplied is the price, so we can see the effect of a price change on quantities supplied in a supply curve. feEaeT Aliz© Individual supply to market supply i ities supplied of all = The market supply schedule is obtained by finding the quantities SUP individual sellers at different prices edule i called horizontal summation: ly sch a imation of all = The process of deriving a market s d via the horizontal su! The market supply curve is obtaine individual supply curves d. Law of supply The law of supply states that the higher (lower) the price of a good, the greater (smaller) its quantity supplied, vice versa, other factors being constant. (ee) Quantity supplied and the price of a good are positively related The supply of some good is fixed, i.e. its supply curve is a vertical line e.g. car park, capacity of cross-harbor tunnel feiEaeT wlizs ch the market demand and supply curve intersect is called the The price at whi equilibrium price or market-clearing price. _ Atthe equilibrium price, the quantity demanded = the quantity supplied — equilibrium is attained and no tendency for the price to change At the equilibrium price, the quantity bought and sold is called the equilibrium quantity, and quantity transacted = equilibrium quantity feiEaeT wliza. Excess demand or Shortage Shortage: quantity demanded is greater than the au set below the equilibrium price - During shortage, quantity transacted = quantity supplied i ** price tends to rise when there is shortage antity supplied whe! = The quantity demanded will continue to fall while the quantity supplied will continue to rise until the price rises to the equilibrium level = Without any intervention, price will return to equilibrium level [The following wordings imply shortage: 1. Queue 2. Excess demand 3. Cannot rent an accommodation 4. Cannot satisfy demand 5. Not all people success in application 6. Draw 7. Not enough units available for applicants 8. Traffic congestion 9. Not enough university places feEaeT Alizb, Excess supply or surplus Surplus; i al pe the quantity supplied is greater than the quantity demanded when the 'S set above the equilibrium price 'n surplus, quantity transacted = quantity demanded a flo de ** price tends to fall when there is surplus The quantity demanded will continue to increase while the quantity supplied will continue to fall until the price drops to the equilibrium level | The following wordings imply surplus: — 1. Vacant rooms 2. Alot of empty seats 3. Unemployment 4. Excess supply 5. Places not yet filled 6. Stocks are piling up feiEaeT wliz