Supply, demand, and scarcity are fundamental economic concepts. Supply refers to the quantity of a good available and is determined by factors like production costs, number of producers, and weather conditions. Demand depends on needs, income, prices of substitutes and complements, and expectations. Both supply and demand curves slope downward. Scarcity means resources are limited, forcing trade-offs in what is produced from constrained land, water, labor, and other resources. Examples include shortages of fertile land, fresh water, skilled workers, and healthcare.

1. SUPPLY
DEMAND
SCARCITY

2. SUPPLY
• a fundamental economic concept that
describes the total amount of a specific good
or service that available to consumers.
• Supply refers to the amount of goods that are
available.

3. • When supply of a product goes up, the price of a
product goes down and demand for the product can
rise because it costs loss. ... As a result, prices will
rise.
Law of Supply- Law of supply states that other factors
remaining constant, price and quantity supplied of a
good are directly related to each other.

4. SUPPLY CURVE
• A supply curve is a relationship between two,
and only two, variables: quantity on the
horizontal axis and price on the vertical axis.
The assumption behind a supply curve is that
no relevant economic factors, other than the
product’s price, are changing.

5. SUPPLY
CURVE

6. FACTORS AFFECTING SUPPLY
• A decrease in costs of production. This means
business can supply more at each price. Lower
costs could be due to lower wages, lower raw
material costs
• More firms. An increase in the number of
producers will cause an increase in supply.

7. FACTORS AFFECTING SUPPLY
• Investment in capacity. Expansion in the
capacity of existing firms, e.g. building a new
factory
• The profitability of alternative products. If a
farmer sees the price of biofuels increase, he
may switch to growing crops for biofuels on all
his fields and this will lead to a fall in the
supply of food, such as wheat.

8. FACTORS AFFECTING SUPPLY
• Related supply. If there is an increase in
the supply of beef (from cows) then
there will also be an increase in the
supply of leather.
• Weather. Climatic conditions are very
important for agricultural products

9. FACTORS AFFECTING SUPPLY
• Productivity of workers. If workers become
more motivated and work hard, then there
will be significant increase in output and
supply.
• Technological improvements. Improvements
in technology, e.g. computers or automation,
reducing firms costs.

10. FACTORS AFFECTING SUPPLY
• Lower taxes. Lower direct taxes (e.g. tobacco
tax, VAT) reduce the cost of goods.
• Government subsidies. Increase in
government subsidies will also reduce the cost
of goods, e.g. train subsidies reduce the price
of train tickets.

11. FACTORS AFFECTING SUPPLY
• Objectives of firms. If firms are profit
maximizes and collude with other firms, we
may see a fall in supply as they try to
maximize profits. However, if they switch to
targeting sales or revenue maximization, then
we will see an increase in supply.

12. DEMAND
• Demand is fundamentally based on needs and
wants—if you have no need or want for
something, you won’t buy it.
• While a consumer may be able to differentiate
between a need and a want, but from an
economist’s perspective, they are the same thing.
Demand is also based on ability to pay. If you
cannot pay for it, you have no effective demand.

13. LAW OF DEMAND
• Demand curves will appear somewhat
different for each product. They may appear
relatively steep or flat, or they may be straight
or curved. Nearly all demand curves share the
fundamental similarity that they slope down
from left to right.

14. DEMAND CURVE
• A demand curve is a relationship between
two, and only two, variables: quantity on the
horizontal axis and price on the vertical axis.
The assumption behind a demand curve is
that no relevant economic factors, other than
the product’s price, are changing.

15. DEMAND
CURVE

16. FACTORS AFFCTING DEMAND

17. FACTORS AFFCTING DEMAND
• Income. An increase in disposable income
enabling consumers to be able to afford more
goods. Higher income could occur for a variety of
reasons, such as higher wages and lower taxes.
• Credit facilities. If it is easier and cheaper to
borrow, this may encourage consumers to buy
expensive items on credit, for example, cars and
foreign holidays.

18. FACTORS AFFECTING
DEMAND
• Quality. An increase in the quality of the good
e.g. better quality digital cameras encourages
people to buy one.
• Advertising can increase brand loyalty to
goods and increase demand. For example,
higher spending on advertising by Coca Cola
has increased global sales.

19. FACTORS AFFCTING DEMAND
• Substitutes. An increase in the price of substitutes,
e.g. if the price of Samsung mobile phones increases,
this will increase the demand for Apple iPhones – a
major substitute for the Samsung.
• Complements. A fall in the price of complements will
increase demand. E.g. a lower price of Play Station 2
will increase the demand for compatible Play Station
games.

20. FACTORS AFFECTING
DEMAND
• Weather: In cold weather, there will be
increased demand for fuel and warm weather
clothes.
• Expectations of future price increases. A
commodity like gold may be bought due to
speculative reasons; if you think it might go up
in the future, you will buy now.

21. SCARCITY
Scarcity refers to resources being finite and
limited. Scarcity means we have to decide how
and what to produce from these limited
resources. It means there is a constant
opportunity cost involved in making economic
decisions. Scarcity is one of the fundamental
issues in economics.

22. EXAMPLES OF SCARCITY
• Land – a shortage of fertile land for
populations to grow food. For
example, the desertification of the
Sahara is causing a decline in land
useful for farming in Sub-Saharan
African countries.

23. EXAMPLES OF SCARCITY
• Water scarcity – Global warming and
changing weather, has caused some
parts of the world to become drier
and rivers to dry up. This has led to a
shortage of drinking water for both
humans and animals.

24. EXAMPLES OF SCARCITY
• Labour shortages. In the post-war
period, the UK experienced labour
shortages – insufficient workers to fill
jobs, such as bus drivers. In more recent
years, shortages have been focused on
particular skilled areas, such as nursing,
doctors and engineers.

25. EXAMPLES OF SCARCITY
• Health care shortages. In any health
care system, there are limits on the
available supply of doctors and
hospital beds. This causes waiting
lists for certain operations.

26. EXAMPLES OF SCARCITY
• Seasonal shortages. If there is a
surge in demand for a popular
Christmas present, it can cause
temporary shortages as demand as
greater than supply and it takes time
to provide.

27. EXAMPLES OF SCARCITY
• Fixed supply of roads. Many city
centres experience congestion –
there is a shortage of road space
compared to number of road users.
There is a scarcity of available land to
build new roads or railways.

28. Thank You!
No complaint... is more common
than that of a scarcity of money.
-Adam Smith