Transcript What is quantity demanded

Demand
&
Supply
What is demand?
Demand is a want supported by purchases power. A person will
have an effective demand for a good only when he is willing and able
to buy the good at given prices.
What is quantity demanded ?
Demand is different from quantity demanded. Demand refers to the
quantities demanded at ALL given prices while quantity demanded
refers to the amount one is willing and able to buy at ONE price per
period of time.
What is demand schedule?
Demand Schedule is a plan of purchases of an individual
showing the quantity of the good he is willing to buy at
different prices.
No. of pens sell per
Price ($)
Week(Quantity
Demanded)
6
5
4
3
2
1
3
4
5
6
7
8
What is supply schedule?
Supply Schedule is a plan of production of a firm showing
the quantity of a good he is willing and able to sell at
different prices.
Price ($)
No. of pens sell per
Week(Quantity
Supplied)
6
5
4
3
2
1
7
6
5
4
3
2
Use this information,
we can show this demand and supply curve.
Price($)
S
6-
5432-
D
10
1
2
3
4
5
6
7
8
9
Quantity/
week
Think about it!!!
1)
Is quantity supplied = supply???
2)
When the price of oranges decreases from $5 to $3,
the quantity demanded increases from 200 to 400
pieces per month.
(a) Sketch the demand curve for oranges.
(b) Does the demand for oranges obey the law of
demand?
Answer:
(1)
Quantity supplied is not equal to supply.
Quantity supplied refers to the quantity of a
good that a producer (or seller) is willing
and able to offer for sale at a particular
price per period of time.
Supply is different quantities planned to
supply at every different price. Therefore,
they are not the same.
(2)
Answer :
a)
Wage Rate
5
3
D
0
b)
200
400
Q
Yes. When the price of oranges
,
the quantity demanded
. Thus, it
obeys the law.
Equilibrium Price
At the beginning, we stated the price was determined
by the two market forces- demand and supply.
Price($)
S
Equilibrium
Price
65432-
D Quantity/
10
6
9
12
15
18
21
week
What is Excess Supply?
Excess Supply means quantity supplied is
more than quantity demanded. We called
this situation “Excess supply” /“surplus”.
What is Excess demand?
On the other hand, when quantity demanded
is more than quantity supplied. We called
this situation “Excess demand” /“shortage”.
What is supply?
Supply refers to the producer’s willingness to sell,
supported by the ability to sell. A producer will have
an effective supply for a an good only when he is
willing and able to sell the good at given prices.
What is quantity supplied?
Supply is different from quantity supplied. Supply
refers to the quantities supplied at ALL given
prices while quantity supplied refers to the amount
one is willing and able to sell at ONE price.
Excess Demand &
Excess Supply
Price($)
6-
S
Surplus
5432-
Shortage
D Quantity/
10
6
9
12
15
18
21
week
Change in quantity Supplied
VS
Change In Supply
Change in Quantity supplied
It refers to the change in quantity sold when there is a change
in the price of the good.
Change in Supply
Supply changes whenever the plan of production changes, and
there will be a new supply curve.
Change in supply is a change in quantity supplied at every
different price.
Increase in Demand Larger than Increase in Supply
P
S1
S2
P2
P1
D2
Q1
Q2
D1
Q
When the increase in demand from D1 to D2 is larger than the
increase in supply from S1 to S2 the equilibrium price will
increase from P1 to P2 and the equilibrium quantity will
increase from Q1 to Q2.
Increase in Demand Smaller than Increase in Supply
S1
P
S2
P1
P2
D1
Q1
Q2
D2
Q
When the increase in demand from D1 to D2 is smaller
than the increase in supply from S1 to S2, the
equilibrium price will decrease from P1 to P2 while the
equilibrium quantity will increase from Q1 to Q2.
Increase in Demand Equal to Increase in Supply
P
S1
S2
p
D1
Q1
Q2
D2
Q
When the increase in demand from D1 to D2 is equal
to the increase in supply from S1 to S2,the
equilibrium price will have NO CHANGE, while the
equilibrium increase from Q1 to Q2.
Think about it !!
1. The popularity of mobile telephone service has
increased recently and the government has more
licenses to new operators.
With the aid of a supply demand diagram, explain
why the charge per minute of the mobile telephone
service would have decreased.
2. When the mad cow disease broke out in
1996, many cows were destroyed. With
the aid of diagram, describes the effects
on the beef market.
Answers:
S0
P
S1
P0
P1
D0
Q0
Q1
D1
Q
1) If the use of mobile telephone service has become
more popular, the demand for mobile telephone
service would have increased from D0 to D1. When
more mobile telephone service licenses have been
issued, the supply of mobile telephone service
would have increased, If the increase in supply is
greater than the increase in demand, the per
minute of mobile telephone service would have
decreased.
Answer :
S2
S1
P
P1
P2
D1
D2
0
Q2
Q1
Q
Suppose the mad cow disease broke out, when there is
decrease in supply fromS1 to S2 ,the supply curve shift to the
left. And people don’t want to eat the mad cow, so the
demand also decrease from D1 to D2, the demand curve shift
to the left.
As a result,the equilibrium price will decrease from P1 to P2
and the quantity transacted will also decrease from Q1 to Q2.
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