Grade 11 – P.O.

B - The Relationship Between Price and Supply and Demand

Packaging – This is the outer wrapping or the container in which the product is sold. The package presents the
product in an attractive way and provides information about the contents, usage and potential hazards of the
products. The Package is also responsible for:
 promoting the product
 protecting the product
 preserving the life of the product
 makes the product more convenient for customers to handle
 enhances the appearance of the product

Branding (Trademark) - this is the letter, letters, word or words that make up the name of the product. The
brand name differentiates one product from another and can be registered so they can only be used by one
company. There are four main ways that a company can protect its products or brand name:
1. By Patent – This gives the business the right to be the only company allowed to use a new product.
2. By registered design – a new distinct visual design may be registered before it is used.
3. By Trademark – using a logo to distinguish a company’s brand (branding).
4. By copyright - this gives legal protection over intellectual materials such as artistic works, literary
works, sound recordings and films etc.

Hire Purchase agreement – this is when a customer takes out an item by paying a part of the cost of the item.
The customer then pays for the item in installments (a deposit weekly or monthly) until the total cost is paid up.
Although the customer now has the product, it still belongs to the company until the customer pays off the total
cost of the item. The customer will also be charged interest on the product and therefore pay more than the cost
of the original cost for the product.

Supply
This refers to the amount of a commodity that producers are willing to put on the market at various prices
within a given time.

Demand
The demand for goods is the amount that consumers are willing to purchase at a given price within a given
period of time. This demand refers to the total demand of all customers for the product. The law of demand
states that “as price increases demands fall, while as prices fall demands increases.

Factors affecting Demand

 The price of the goods
 The price of other substitute or similar goods
 The income of the buyers/consumers
 The population or number of buyers
 The buyers preference

A graph can be used to show the demand for a product as shown below:

Market Demand Schedule

Quantity
Price of each demanded at
candy bar ($) each price

10 500
20 400
30 300
40 200
50 100

The demand curve slopes downwards from left to right from the point it stats on the graph. This is so because
consumers buy more of a product when the price is low. There is a negative relationship between prices and
the demand for a product. Meaning as prices rise, demand falls. Although increases in demand will cause prices
to become higher.

Changes in Demand
Various factors can cause a shift or change in the position of the demand curve. If there is an increase in
demand then the curve will shift to the right, however if there is a decrease in the demand then the curve will
shift to the left.

Price Demand Demand Demand

($) 1 0
10 500 600 350
20 400 500 200
30 300 400 150
40 200 300 100
50 100 200 50

A graph can also be used to show the market supply for products as shown below:

Market Supply Schedule

Price $ Quantity

10 100
20 200
30 300
40 400
50 500

Unlike the demand curve, the supply curve usually slopes upwards to the right. There is a positive relationship
between prices and the supply of a product. Meaning, as prices rise, supply increases also. Although when there
is an excess supply of the product prices begin to fall. The supply curve shows the prices at which the producer
provides certain quantities of goods.

Changes in Supply
Various factors can cause a shift or change in the position of the supply curve. If there is an increase in supply
then the curve will shift to the right, however if there is a decrease in the supply the curve will shift to the left.

Price Supply Supply 1 Supply 0

($)
10 100 150 50
20 200 250 150
30 300 350 250
40 400 450 350
50 500 550 450

Equilibrium Price
This is the price at which supply and demand are equal (at the same level/quantity) as shown in the graph
below:
HOME WORK (Will be graded)
Price ($) Quantity Quantity
Demanded Supplied
5 100 500
4 200 400
3 300 300
2 400 200
1 500 100

HOME WORK (Will be graded)