Scribd
Upload
49 views3 pages

Supply and Demand

Uploaded by

omphilekekana48
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
49 views3 pages

Supply and Demand

Uploaded by

omphilekekana48
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 3

Supply and Demand: An Overview

1. Basic Definitions

• Demand: The quantity of a good or service that consumers are willing and able to
purchase at various prices during a given period.
• Supply: The quantity of a good or service that producers are willing and able to offer
for sale at various prices during a given period.

2. Law of Demand

• Inverse Relationship: As the price of a good or service decreases, the quantity


demanded increases, and vice versa.
• Demand Curve: Downward-sloping, illustrating the inverse relationship between
price and quantity demanded.

3. Law of Supply

• Direct Relationship: As the price of a good or service increases, the quantity


supplied increases, and vice versa.
• Supply Curve: Upward-sloping, reflecting the direct relationship between price and
quantity supplied.

4. Determinants of Demand

• Price of the Good: Fundamental factor affecting demand.


• Income: Higher income increases demand for normal goods and decreases demand
for inferior goods.
• Prices of Related Goods:
o Substitutes: Increase in the price of one leads to an increase in the demand for
the other.
o Complements: Increase in the price of one leads to a decrease in the demand
for the other.
• Tastes and Preferences: Changes can shift demand.
• Expectations: Future expectations of prices and income can influence current
demand.
• Number of Buyers: More buyers increase demand.

5. Determinants of Supply

• Price of the Good: Fundamental factor affecting supply.


• Input Prices: Higher costs of production decrease supply.
• Technology: Improvements can increase supply.
• Expectations: Expectations of future prices can influence current supply.
• Number of Sellers: More sellers increase supply.
• Government Policies: Taxes, subsidies, and regulations can impact supply.

6. Market Equilibrium
• Equilibrium Price: The price at which the quantity demanded equals the quantity
supplied.
• Equilibrium Quantity: The quantity that corresponds to the equilibrium price.

7. Shifts vs. Movements

• Movement Along the Curve: Caused by a change in the price of the good itself.
o Demand Curve Movement: Change in quantity demanded.
o Supply Curve Movement: Change in quantity supplied.
• Shift of the Curve: Caused by changes in non-price factors.
o Demand Curve Shift: Change in demand due to factors like income, tastes,
etc.
o Supply Curve Shift: Change in supply due to factors like technology, input
prices, etc.

8. Elasticity

• Price Elasticity of Demand: Measure of how much quantity demanded responds to a


change in price.
o Elastic: Quantity demanded changes significantly with price changes.
o Inelastic: Quantity demanded changes little with price changes.
• Price Elasticity of Supply: Measure of how much quantity supplied responds to a
change in price.
o Elastic: Quantity supplied changes significantly with price changes.
o Inelastic: Quantity supplied changes little with price changes.

9. Market Dynamics

• Surplus: When quantity supplied exceeds quantity demanded at a given price, leading
to downward pressure on prices.
• Shortage: When quantity demanded exceeds quantity supplied at a given price,
leading to upward pressure on prices.

10. Real-World Applications

• Price Controls: Government-imposed limits on how high or low a price can go (e.g.,
price ceilings, price floors).
• Taxes and Subsidies: Affect supply and demand by altering production costs and
consumer prices.
• Market Interventions: Policies aimed at stabilizing or controlling markets can
impact supply and demand dynamics.

Summary

Supply and demand are fundamental concepts in economics that describe the behavior of
buyers and sellers in a market. Understanding these principles helps explain how prices are
determined and how resources are allocated in an economy. Factors influencing supply and
demand include prices, income levels, technology, and government policies. Elasticity
measures the responsiveness of supply and demand to changes in prices and other factors.
Market equilibrium occurs where supply equals demand, but this balance can be disrupted by
various market forces and interventions.

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy