1) Demand is the quantity of a good or service that consumers are willing and able to purchase at various price levels. The demand curve has a negative slope and shifts right when factors like income or preferences increase, and left when they decrease. 2) Supply is the quantity of a good or service that producers are willing to offer on the market at various price levels. The supply curve has a positive slope and shifts right when costs of production decrease and productivity increases, and shifts left when these factors decrease. 3) The interaction of supply and demand determines the equilibrium price and quantity in a market. When demand or supply shifts, a new equilibrium is established.

1. DEMAND AND
SUPPLY

2. • Quantity of commodity buyers are willing
to buy
• Behavior of buyers
• Relationship between
• Quantity demanded of a good
• Price
• Holding other factors constant
Demand

3. •Amount of good or service
•Per unit of time
•The amount of goods which would be
demanded at a particular price.
Quantity Demanded

4. Demand Schedule
•List of Qd at each price
•table of the quantity demanded of a
good at different price levels
• table that lists the quantity of a good
all consumers in a market will buy at
every different price

5. Demand Schedule
Price Quantity
Demanded
1 5
2 4
3 3
4 2
5 1

6. Demand Curve
•Graph of demand schedule
•A graphic representation of the
relationship between the price of a
commodity and the quantity demanded
•Has negative slope

7. Demand Curve
0
1
2
3
4
5
6
1 2 3 4 5
Quantity demanded
Price

8. Law of Demand
•As the price (P) increases the quantity
demanded (Qd) decreases
•As the price (P) decreases the
quantity demanded (Qd) increases

9. Factors Affecting Demand
• Income
• If income decreases demand for such
goods and services also declines
• Purchasing power of individuals
• Normal goods- increase in income =
increase in demand
• Inferior goods- increase in income =
decrease in demand

10. • Buyer expectation
• Expected change in
• Future income
• Future prices
• No. of buyers/ consumers
• More people = more demand for goods
and services
• demographics

11. • Preferences and taste
• Trend
• Change in technology
• Something you want
• Likes and dislikes
• Prices of related goods
• When the price of a certain product
increases, people tend to buy a substitute
product
• In the case of complementary goods, if the
price of one good increases the demand the
demand for the other goods decreases

12. Change in Demand
•Other factors affecting demand
changes
•Either shift to the RIGHT
•Or shift to the LEFT

13. Shifting of the curve to the
right
0
1
2
3
4
5
6
1 2 3 4 5
Quantity demanded
Price

14. Shifting of the curve to the left
0
1
2
3
4
5
6
1 2 3 4 5
Quantity demanded
Price

15. Change in Quantity Demanded
•Movement along the curve
•Theres a change in price and holding
other factors constant

16. Shifting along the curve
0
1
2
3
4
5
6
1 2 3 4 5
Quantity demanded
Price

17. Supply
•Amount of goods and services sellers
are willing to sell or supply in the
market
•The amount of a resource that is
available

18. Law of Supply
•As the price(P) increases quantity
supplied (Qs)also increases
•And as the price (P) decreases the
quantity supplied (Qs)also decreases

19. Supply schedule
Price Quantity supplied
1 1
2 2
3 3
4 4
5 5

20. Supply Curve
0
1
2
3
4
5
6
1 2 3 4 5
Quantity supplied
Price

21. Factors Affecting Supply
• Cost of inputs
• These are the raw materials needed in
producing goods
• Prices of related goods
• Changes in price of goods have effects in the
supply of such goods
• Seller expectation
• Expect to rise very soon = keep the goods then
releases when prices are already high

22. • No. of sellers
• More sellers or more producers = increase in
supply
• Less sellers or less producers = decrease in
supply
• Productivity
• Output
• Increase in output lowers cost
• Cause:
• Technology
• Human capital

23. Change in Supply
•Other factors affecting supply change
•If it increases shift to the RIGHT
•If it decreases shift to the LEFT

24. Change in Supply
0
1
2
3
4
5
6
1 2 3 4 5
Quantity supplied
Price

25. 0
1
2
3
4
5
6
1 2 3 4 5
Quantity supplied
Price

26. Change in Quantity Supplied
•When price change holding other
factors constant
•Movement along the curve

27. 0
1
2
3
4
5
6
1 2 3 4 5
Quantity supplied
Price