Transcript Supply & Demand

Supply & Demand
BASICS
Demand & Wants
 Wants
= the
desire for things
with or without
purchasing
power (the
ability to buy)

Demand = the
willingness and
ability
(purchasing
power) to buy
something
Demand & Quantity Demanded
 Demand refers to
the various
quantities of a
good one is
willing and able to
buy at different
prices.
 Quantity
demanded is the
particular quantity
at which one is
willing and able to
buy at a particular
price.
To illustrate their difference...
Price
10
8
6
4
2
Quantity
100
120
140
160
180
To illustrate their difference...
Price
10
8
6
4
2
Quantity
100
120
140
160
180
• Demand refers to
the whole plan
To illustrate their difference...
Price
10
8
6
4
2
Quantity
100
120
140
160
180
• Demand refers to
the whole plan
• Quantity
demanded refers
to the single
quantity inside the
plan
Individual Demand Curve
A demand schedule :
Price
10
8
6
4
2
Quantity
100
120
140
160
180
 An individual
demand curve
is a curve that
links the different
quantity
demanded of a
person with their
respective prices.
Individual Demand Curve
Price
10
8
6
4
2
Quantity
100
120
140
160
180
Plotting it on a graph
Individual Demand Curve
Price
10
8
6
4
2
Quantity
100
120
140
160
180
Plotting it on a graph
P
0
Q
Individual Demand Curve
Price
10
8
6
4
2
Quantity
100
120
140
160
180
Plotting it on a graph
P
10
0 100
Q
Individual Demand Curve
Price
10
8
6
4
2
Quantity
100
120
140
160
180
Plotting it on a graph
P
10
6
0 100 140
Q
Individual Demand Curve
Price
10
8
6
4
2
Quantity
100
120
140
160
180
Plotting it on a graph
P
10
6
2
0 100 140 180 Q
Individual Demand Curve
Price
10
8
6
4
2
Quantity
100
120
140
160
180
Plotting it on a graph
P
10
6
2
0 100 140 180
D
Q
Law Of Demand
P
10
2
100
D
180 Q
Law Of Demand
 Law
P
10
2
100
D
180 Q
of Demand
states that the
quantity demanded
of a good will fall
when its price rises in
a given period of time,
ceteris paribus, and
vice versa.
Law Of Demand
 Law
P
10
Negatively
sloped
2
100
D
180 Q
of Demand
states that the
quantity demanded
of a good will fall
when its price rises in
a given period of time,
ceteris paribus, and
vice versa.
Law Of Demand
 Law
P
10
Negatively
sloped
2
100
D
180 Q
of Demand
states that the
quantity demanded
of a good will fall
when its price rises in
a given period of time,
ceteris paribus, and
vice versa.
Law Of Demand
 Law
P
10
Negatively
sloped
2
100
D
180 Q
of Demand
states that the
quantity demanded
of a good will fall
when its price rises in
a given period of time,
ceteris paribus, and
vice versa.
Why P Qd  ?
• When the price of a good rises, the
opportunity cost of buying this good
rises.
• Given a fixed amount of money, the
quantity of a good one can buy will
fall when its price rises.
Supply & Wants
 Wants
= the
 Supply = the
desire for selling
willingness and
things with or
ability
without the
(resources and
ability to
technology) to
produce.
sell something
Supply & Quantity Supplied
 Supply refers to
the various
quantities of a
good one is
willing and able to
sell at different
prices.
 Quantity
supplied is the
particular quantity
at which one is
willing and able to
sell at a particular
price.
To illustrate their difference...
Price
10
8
6
4
2
Quantity
200
175
150
125
100
To illustrate their difference...
Price
10
8
6
4
2
Quantity
200
175
150
125
100
• Supply refers to
the whole plan
To illustrate their difference...
Price
10
8
6
4
2
Quantity
200
175
150
125
100
• Supply refers to
the whole plan
• Quantity Supplied
refers to the single
quantity inside the
plan
Individual Supply Curve
A supply schedule :
Price
10
8
6
4
2
Quantity
200
175
150
125
100
 An individual
supply curve
is a curve that
links the different
quantity supplied
of a person with
their respective
prices.
Individual Supply Curve
Price
10
8
6
4
2
Quantity
200
175
150
125
100
Plotting it on a graph
Individual Supply Curve
Price
10
8
6
4
2
Quantity
200
175
150
125
100
Plotting it on a graph
P
0
Q
Individual Supply Curve
Price
10
8
6
4
2
Quantity
200
175
150
125
100
Plotting it on a graph
P
10
0
200
Q
Individual Supply Curve
Price
10
8
6
4
2
Quantity
200
175
150
125
100
Plotting it on a graph
P
10
6
0
150 200 Q
Individual Supply Curve
Price
10
8
6
4
2
Quantity
200
175
150
125
100
Plotting it on a graph
P
10
6
2
0 100 150 200 Q
Individual Supply Curve
Price
10
8
6
4
2
Quantity
200
175
150
125
100
Plotting it on a graph
P
S
10
6
2
0 100 150 200 Q
Law Of Supply
P
S
10
2
100
200
Q
Law Of Supply
 Law
P
S
10
2
100
200
Q
of Supply states
that the quantity
supplied of a good
will rise when its
price rises in a given
period of time, ceteris
paribus, and vice
versa.
Law Of Supply
P
Positively
sloped
 Law
S
10
2
100
200
Q
of Supply states
that the quantity
supplied of a good
will rise when its
price rises in a given
period of time, ceteris
paribus, and vice
versa.
Law Of Supply
P
Positively
sloped
 Law
S
10
2
100
200
Q
of Supply states
that the quantity
supplied of a good
will rise when its
price rises in a given
period of time, ceteris
paribus, and vice
versa.
Law Of Supply
P
Positively
sloped
 Law
S
10
2
100
200
Q
of Supply states
that the quantity
supplied of a good
will rise when its
price rises in a given
period of time, ceteris
paribus, and vice
versa.
Why P Qs  ?
• When the price of a good rises, the
opportunity cost of producing other
goods rises.
• When the price of its good rises,
the producer can have more money
for buying materials and recruiting
labour.