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BUSINESS ADMINISTRATION
DEPARTMENT

LECTURE NO: 3

Demand & its Analysis

COURSE INSTRUCTOR:
SHAGUFTA SALEEM SHAIKH

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Lectures Outlines

 Definition of Demand & Supply

 Factors of Demand & Supply
 Tables, Graphs & Equations
 Slope & Derivates
 Market Demand
 Market Equilibrium
 Exercises

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Definition of Demand

 “The quantities that people are or

would be willing to buy at different
prices during a given time period,
assuming that other factors affecting
these quantities remain the same”

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What is Demand?

 Quantities of a
particular good or
service consumers
are willing and able
to buy at different
possible prices.

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Tabular format of Demand

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Graphical representation of Demand

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The Law of Demand

 Consumers buy more of a good when

its price decreases and less when its
price increases.

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The Demand Curve

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Factors of Demand

1. Changes in income (the income effect)

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Factors of Demand Conti..

2. Prices or availability of substitutes

(substitution effect)
 A substitute is a good that can be used in
place of another

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Factors of Demand Conti..

3. Prices or availability of complementary

goods..
 Complementary goods are things that are
often are sold or used together.

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Factors of Demand Conti..

4. Changes in the number of buyers..

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Factors of Demand Conti..

5. Changes in tastes & preferences..

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What is supply?

The amount of a product that

is offered for sale at all
possible prices in the market.

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The Law of Supply

 Tendency of suppliers to offer more of a good

at a higher price and less at lower prices.

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The Supply Curve

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So…….

 The law of demand

describes how price affects
CONSUMERS…

 And the law of supply

describes how price affects
PRODUCERS…

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Factors of Supply

1. Cost of inputs (factors of production)..

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Factors of Supply

2. Changes in productivity…

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Factors of Supply

 3. Change in the number of sellers in the

market..

 More sellers in a market = increase supply.

 Fewer sellers in a market = decrease supply

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Equilibrium Price

 The equilibrium price is where supply and

demand intersect.

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Equilibrium Price

The equilibrium price is the

market price where the quantity of goods
supplied is equal to the quantity of goods
demanded.

This is the point at which the demand and

supply curves in the market intersect.

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Equilibrium Quantity

Equilibrium Quantity is the quantity

demanded and the quantity supplied at
the equilibrium price.

Both the quantity and price are impacted

when a market is out of equilibrium.

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Example: 1

Suppose that demand is given by the

equation QD=500 – 50P, where QD is
quantity demanded, and P is the price
of the good.
Supply is described by the equation
QS= 50 + 25P where QS is quantity
supplied. What is the equilibrium price
and quantity?

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Solution:

To find where Qs=Qd we put the two equations together

500-50P = 50+25P
500-50 = 50P + 25P
450 = 75P
P = 450/75
P=6
To find Q, we just put this value of P into one of the
equations.
500-50(6) = 200
and
50+25(6) = 200
So we know that equilibrium price is 6, and equilibrium quantity is 200.

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Example:2

Demand and supply in a market are described by the

equations
Solve algebraically to find equilibrium Price and Quantity.

Qd = 66-3P,
Qs = -4+2P
Example:3

Qd= 16-2P
Qs= 2+5P

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Example: 4

Suppose market demand and supply are given by

Qd = 10 - 32P and Qs = 5 + 3P. Show all work for
this question.
A) What is the equilibrium price and quantity?
B) Show the equilibrium values using demand
and supply curves.

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Special Thanks…..

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