03 LCD Slides Handout 1 PDF
03 LCD Slides Handout 1 PDF
03 LCD Slides Handout 1 PDF
MARKETS, COMPETITION AND
DEMAND
Markets and Competition
Demand
Source: http://www.theguardian.com
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Markets and Competition Markets and Competition
Market
• Consists of sellers and buyers of a particular service or good
• Sellers determine the supply, while buyers determine the
demand
Source: http://tweakyourbiz.com Source: http://www.americanimmigrationcouncil.org
Source: http://www.entrepreneur.com Source: http://www.inc.com
Source: http://ourviews.sc.com
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Markets and Competition Demand
Competitive Market Definitions of Demand
A market in which there are many buyers and many sellers so • The quantities of a product that a consumer is willing and able
that each has a negligible impact on market price to purchase at a given price and at a given point in time
• Indicates the quantity of a commodity that will be in demand
at different prices
Source: http://blog.galoo.com
Source: http://www.financialexpress.com
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Demand Demand
Constituents of Demand Law of Demand
• Desire for a specific commodity • Assuming all factors being equal, as the price of a good or
service increases, consumer demand for the good or service
• Money to satisfy the desire
will decrease and vice versa
• Willingness to spend the money
• The demand for the good is inversely proportional with the
• Relationship of the price and the quantity of the commodity price of that good
demanded
• The quantity of a good that people will buy is influenced or is
• Relationship of time and quantity of the commodity determined by its price
demanded
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Demand Demand
Characteristics of the Law of Demand Demand Relationship
• Inverse relationship • Relationship between price and quantity demanded
• Price is an independent variable and demand is the
dependent variable
Demand Schedule
• Other things remain constant
• A tabular representation illustrating the various prices of a
• Direction of change particular good or service and the quantity demanded for
each
• Relationship with time
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Demand Demand
Individual demand schedule Market demand schedule
• A table showing the quantities of a given commodity which an • The quantities of the given commodity which all consumers
individual consumer will buy at all possible process at a given will buy at all possible prices at a given moment in time
time
Price of Demand of A Demand of B Market Demand
Price Quantity Demanded Commodity X (Units)
1 3 4 3 + 4 = 7
P1 Q1
2 2 3 2 + 3 = 5
P2 Q2
3 1 2 1 + 2 = 3
P3 Q3
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Demand Demand
Demand Curve Individual demand curve
• A graphic representation of a demand schedule • A curve that shows different quantities of commodities
demanded by an individual customer
• Represents the maximum quantities per unit of time that
customers will take at various prices Market demand curve
• A curve that represents the aggregate demand of all
consumers in the market at different prices of a particular
commodity
• Horizontal summation of individual demand curves
Source: http://blog.zuberance.com
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Demand Demand
Factors Influencing Demand
• Price of the commodity
• Price of related/ complementary
goods
• Price of substitute goods Source: http://www.theguardian.com
• Consumer’s income
Source: http://www.investopedia.com
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Demand Demand
Factors Affecting Demand Curve
• Price and Income
• Size and Composition of Population
Source: http://www.brandid.ch
• Price of Related goods: Substitutes
Factors Influencing Demand • Price of Related goods: Complements
• Consumer’s taste and preference • Taste of buyers
• Size and composition of the population • Expectations
• Expectation of price change of the commodity
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Demand Demand
Law of Downward Sloping Demand Curve
• States that when the price of a certain commodity decreases,
the quantity demanded for such commodity increases
• When the demand schedule is being plotted, the demand
curve shows a downward sloping curve, from left to right
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Demand Demand
Reasons for downward slope of demand curve Decrease in demand
• Law of Diminishing Marginal Utility • Decrease in income
• Income effect • Fall in the price of substitute good
• Substitution effect • Rise in the price of complementary good
• Different uses of goods • Expectation of fall in price
• Size of consumer group • Decrease in population
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Demand
Increase in demand
• Increase in income
• Increase in price of substitute good
• Fall in the price of complementary good
• Expectation of rise in price
• Increase in population
*Property of STI J0015
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