Supply & Demand Presentation
Supply & Demand Presentation
Supply & Demand Presentation
DEMAND
Presentation by: Hareem Rehan
Ayesha Zafar
Contents
Market
Definition's
Laws
How each are plotted on graphs
Price mechanism
Equilibrium
A newly issued commodity
elasticity
NOTE:
Because we are studying the
concept of supply and demand
according to the market
requirement , we will consider
QUANTITY demanded by
consumers/buyers and
QUANTITY supplied by
producers/sellers.
What is a Market?
Any medium where buying and selling of
anything ,be it a commodity or share,
takes place. This may be a street market
or even online shopping websites or stock
exchanges.
Consists of consumers/buyers and
producers/sellers.
In a goods market, money is the medium
of exchange and prices are usually
determined by the market forces of
supply and demand.
Buye
rs
Mark
et
Selle
rs
What is Demand?
The willingness as well as the
presence of ability to buy a
commodity is DEMAND.
willingness
abilit
y
DEMAND
Quantity
Demanded
The quantity of a certain
commodity that buyers
were willing and able to buy
at a certain price is the
QUANTITY DEMANDED.
This type of demand is set
by consumers.
Consumers are the
demanding force in a
market.
The Law of
According to human phycology consumers
Demand
buy more of a good when price decreases and
less when price increases as they are
concerned with SELF-GAIN.{ No factor
influences our decision other than price}
Increase
in price
means
reduced
demand
Reduction in
price means
increased
demand
Quantity
Demanded
$10
6 liters
$20
4 liters
$30
2 liters
The
demand
curve
Sloping
downwards.
Negative slope due
to negative relation.
Determinants of
DEMAND
Determinants of
demand
What is supply?
The willingness and ability combined of
a producer/seller to sell his commodity
is supply.
The ability
of a seller
to sell
The
willingness of
a seller to sell
SUPPLY
Quantity Supplied
The quantity of a certain
commodity
that sellers
were willing and able to buy
at a certain price is the
QUANTITY SUPPLIED.
This type of supply is set by
producers. Producers are
the supplying force in a
market.
Measured after a fixed
Supply increases
as price increases
Supply
decreases as
price
decreases
Quantity
Supplied
$10
2 liters
$20
4 liters
$30
6 liters
The supply
curve
Sloping upwards.
Positive slope due
to negative relation.
Determinants of
There are certain factors other
than price of a commodity that
may influence the quantity
supplied. They may cause it to
increase or decrease
respectively.
Hence while drawing supply
curves certain considerations as
to what causes the quantity to
change should be essential.
These may influence our
SUPPLY
Determinants of
Supply
MOVEMENTs IN
CURVES
Extension
causes a
decrease in
price.
Contraction
causes an
increase in
price.
Extension
causes an
increase in
price.
Contraction
causes a
decrease in
Supply curve:
The quantity supplied per
price increases due to
change in any factor other
than price.
supply curve:
The quantity
supplied per price
decreases due to
change in any factor
other than price.
EQUILIBRIUM
Market equilibriumis
amarketstate where the
supply in themarketis
equal to the demand in
themarket.
Theequilibriumprice is
the price of a good or
service when the supply of
it is equal to the demand
for it in themarket. It is
Po = EQUILIBRIUM
QUANTITY
Qo = EQUILIBRIUM
QUANTUTY
DISEQUILIBRIU
A market situation
in
which
the
M
quantity supplied is unequal to
quantity demanded.
QUANTITY SUPPLIED
QUANTITY DEMANDED
THERE ARE 2 DISEQUILIBRIUM
SITUATIONS A SURPLUS OR A SHORTAGE.
THE PRICE
Price mechanism refers to
MECHANISM
the system where the forces
of demand and supply
determine the prices of
commodities and the
changes therein. It is the
buyers and sellers who
actually determine the price
of a commodity.
Many markets have used
ELASTICITY
CALCULATING PRICE
ELASTICITY
Price Elasticity if DEMAND/SUPPLY {pE} :
pE =
% CHANGE IN QUANTITY
% CHANGE IN PRICE
100
Types of Elasticity
Perfectly inelastic
PE = 0
Inelastic Curve
PE < 1
Unitary Elastic Curve
PE = 1
Elastic Curve
PE > 1
Perfectly Inelastic Curve
PE = ~
THE
END