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Principles of Economics: Almoatassem Mostafa, Ph.D.

This document discusses the key concepts of demand and supply, including the determinants of demand such as price, income, preferences, and expectations. It explains how demand is represented by a schedule and curve that show the relationship between price and quantity demanded. The document also examines how shifts in demand can occur due to changes in the variables that determine demand.
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0% found this document useful (0 votes)
28 views

Principles of Economics: Almoatassem Mostafa, Ph.D.

This document discusses the key concepts of demand and supply, including the determinants of demand such as price, income, preferences, and expectations. It explains how demand is represented by a schedule and curve that show the relationship between price and quantity demanded. The document also examines how shifts in demand can occur due to changes in the variables that determine demand.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Principles of Economics

AlMoatassem Mostafa, Ph.D.;


al_moatassem@mans.edu.eg
Chapter Four: The Demand &
Supply Analysis
‫تحليل الطلب والعرض‬
Chapter Four: The Demand &
Supply Analysis

Demand

Supply

Elasticity
Introduction
Introduction
• Markets are always responding to events,
– such as bad harvests‫ فساد المحاصيل‬and changing
consumer tastes‫تغير أذواق المستهلكين‬
– they affect the prices and quantities of particular goods.
• The demand for some goods increases, while the
demand for others decreases.
• The supply of some goods rises, while the supply
of others falls.
• As such events unfold‫ تحدث‬, prices adjust ‫ تتغير‬to
keep markets in balance.
Introduction
• Demand is a representation‫ يمثل‬of the behaviour of
buyers
• Supply is a representation of the behaviour of sellers.
• Buyers may be consumers purchasing groceries‫يشترون‬
‫ منتجات البقالة‬or producers purchasing iron ore to make steel.
• Sellers may be firms selling cars or households selling
their labour services.
• The ideas of demand and supply apply,
– whatever the identity of the buyers or sellers and
– whatever the good or service being exchanged in the market.
Demand Schedule

Demand
& Demand Curve

Changes in
Demand

Determinants of
Demand
Demand
• Each good or service has its own special
characteristics that determine the quantity people
are willing and able to consume:
1. the price of the good or service itself.
2. consumer preferences‫فضيالتاــمستهلك‬ ‫ل‬ ‫ تــــ‬,
3. prices of related goods and services ‫أسعـار لاــسلعـ‬
‫ لاــمرتـبطة‬,
4. Income‫ الدـخـل‬,
5. demographic characteristics such as population
size‫ عـدد لاــسكان‬, and
6. buyer expectations‫تـــقعـات لاــمشترـي‬
‫وـ‬
Demand
Application
• Can you guess what determines the number
of pizzas purchased by people?
Application
• Different variables‫ متغيرـات‬play different roles
in influencing ‫تـــير‬
‫ أثـ‬the demands for different
goods and services,
• Economists pay special attention to one: the
price of the good or service.
The Demand Schedule & The
Demand Curve
• Individual demand‫ الطلب الفردي‬:
– a schedule‫ جدول‬of the quantities ‫ كميات‬of a good which a
consumer stands ready to take off ‫ شراء‬the market at a
series of prices ‫ سلسلة من األسعار‬at a given moment of
time.
– It is this schedule which represents his call ‫طلبه‬for the
good.
• The market demand for a good is the
summation of the demand schedules of all of
the individuals participating ‫ يشترك‬in the
market.
14
The Demand Schedule & The
Demand Curve
• The quantity demanded of a good or
service is the quantity buyers are willing‫على‬
‫ استعداد‬and able to buy at a particular price
during a particular period,
– all other things unchanged‫مع ثبات العوامل األخرى‬.
– The quantity demanded at each price would
be different if other things that might affect it,
such as the population of the town, were to
change.
15
The Demand Schedule & The
Demand Curve
• Demand Schedule‫جدول الطلب‬
– A table that shows the quantities of a good or service
demanded at different prices during a particular period, all
other things unchanged.
– The information given in a demand schedule can be
presented with a demand curve.
• Demand Curve‫منحنى الطلب‬
– A graphical representation‫ تمثيل بياني‬of a demand schedule.
– Shows the relationship between the price and quantity
demanded of a good or service during a particular period,
all other things unchanged

16
17
The Demand Schedule & The
Demand Curve
• A movement along a demand curve that
results from a change in price is called a
change in quantity demanded‫ تغير الكمية المطلوبة‬.
– A change in quantity demanded is not a change or
shift in the demand curve;
– it is a movement along the demand curve.
• The negative slope ‫ سالب الميل‬of the demand
curve suggests a key behavioural relationship
of economics.

18
The Demand Schedule & The
Demand Curve

19
Changes in Demand
• Price alone does not determine the quantity
of a good or service that people consume.
• A change in any one of the variables held
constant in constructing a demand
schedule will change the quantities
demanded at each price.
– The result will be a shift‫ انتقال‬in the entire
demand curve rather than a movement along
the demand curve
20
Changes in Demand
• A shift in a demand curve is called a
change in demand.

21
Changes in Demand
• Just as demand can increase, it can
decrease.
– In the case of coffee, demand might fall as a
result of events such as
• a reduction in population‫ قلة عدد السكان‬,
• a reduction in the price of tea, or
• a change in preferences‫التغير في التفضيالت‬

22
Changes in Demand

23
Changes in Demand

24
Determinants of Demand
‫محددات الطلب‬
• A variable that can change the quantity of
a good or service demanded at each price
is called a demand shifter.

25
Determinants of Demand
• A variable that can change the quantity of
a good or service demanded at each price
is called a demand shifter.

26
Consumer Preferences
• Changes in preferences of buyers can
have important consequences for demand.
– A change in preferences that makes one good
or service more popular will shift the demand
curve to the right.
– A change that makes it less popular will shift
the demand curve to the left.

27
Prices of Related Goods &
Services
• if a reduction in the price of one good
increases the demand for another,
– the two goods are called complements ‫سلع‬
‫متكاملة‬.
• If a reduction in the price of one good
reduces the demand for another,
– the two goods are called substitutes ‫ سلع بديلة‬.

28
Prices of Related Goods &
Services

30
Income
• As incomes rise, people increase their consumption
of many goods and services,
• There are goods and services for which
consumption falls as income rises—and rises as
income falls.
– Example: people tend to consume more fresh fruit but
less canned fruit
– A good for which demand increases when income
increases is called a normal good.
– A good for which demand decreases when income
increases is called an inferior good.
31
Demographic Characteristics
• The number of buyers affects the total
quantity of a good or service that will be
bought
– the greater the population, the greater the
demand.
– As the share of the population over age 65
increases, the demand for medical services
increases.
– Demand can shift as a result of changes in both
the number and characteristics of buyers.
32
Consumer Expectations
• The consumption of goods that can be easily
stored, or whose consumption can be
postponed, is strongly affected by buyer
expectations.
• An expectation of higher prices in the future will
lead to more purchases today.
• If the price of a good is expected to fall,
however, people are likely to reduce their
purchases today and await tomorrow’s lower
prices.
33
Application
• Case in Point: Solving Campus Parking
Problems Without Adding More Parking
Spaces

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