Transcript S4_demand.pps

-- About the consumers
-- The plan of the purchase of a
consumer
-- Show the relationship between
the price and the quantity
demanded
-- Quantity demanded : willingness
to buy
Demand can be expressed in form of :
A) Equation
e.g. Qd = 15 - 3P
As P
Qd
(assumptions)
B) Table (schedule)
e.g. Coca - cola
PP
Qd
C) Graph
5
2
3
3
2
5
P
As P
Qd
P : Price
Qd : Quantity demanded
D : Demand curve
D
Qd
It states that when the price of a good falls,
other factors remain unchanged, the
quantity demanded will increase.
Or
It states that the price and the quantity
demanded are negatively related, keeping
other factors constant.
STEP 1 : Draw the x - axis and the y - axis
STEP 2 : Name the price (P) and the quantity demanded (Qd)
STEP 3 : Name the graph
STEP 4 : Draw a downward sloping line
Change in price
STEP 5 : Mark the original
price (P0) and original quantity
demanded (Q0)
STEP 6 : Decide weather the
price increases or decreases,
draw a mark along the y - axis
Change in other factors
STEP 5 : Decide weather
the demand increases or
decreases when the other
factors change
STEP 6 : If the demand
increases,the demand curve
shift to right. If the
demand decreases,the
demand curve shift to left
Individual demand VS Market demand
Individual demand for apple
P
2
4
6
P
2
4
6
Qd
6
4
2
Qd
4
2
0
A
B
Market demand for apple
P
Qd
A+B
2
10
6+4
4
6
2+4
6
2
2+0
P
P
apple
6
4
4
DA
2
0
apple
6
2
4
6
DB
2
Qd
Qd
0
2
4
6
P
apple
6
4
DA+B
2
0
Qd
2
4
6
8
10
Change in quantity demanded VS Change in demand
Reason for change in quantity demanded
Change in price
Change in quantity demanded
e.g.If the price of beef decrease, the quantity
demanded of the beef will increase.
P
beef
P0
That is a movement along
the demand curve.
P1
D
Q0 Q1
Qd
Reasons for change in demand
Change in other factors
Change in demand
A) Substitutes (Two goods which can replace one another)
Coca -cola and Pepsi are substitutes. If the price of Pepsi
increases,the demand for Coca - cola will increase
P
Coca - cola
The demand curve shifts to the
right when the demand increases.
D0
D1
Q
B) Complements ( Two goods which have to be used together)
The pens and ink are complements.If the price of ink increases,
the demand for the pens will decreases.
P
Pens
D1
D0
Q
The demand curve shifts to the
left,when the demand decreases.
C) Normal good / Superior good (a good which consumers
will consume more when their income increases.)
If the consumer’s income increases,the demand for normal
good (e.g. eat dinner in the restaurant ) will increases.
P
dinner
D0
D1
Q
The demand curve shifts to the right
when the demand increases.
D)Abnormal good/ Inferior good (a good which
consumers will consume less when there income
increases)
If the consumer’s income increases, the demand for the
abnormal good (the rice) will decreases.
P
rice
D1
The demand curve shifts to
the left when the demand
decreases.
D0
Q
A) Joint (complementary) demand ( two goods are in joint
demand if they are complements of each other.)
e.g. Discmans and CDs
When the price of discman decreases,people will buy more
of it .That is an increases in quantity demanded of discman.
Having more dismans, naturally people will demand for
more CDs.
CDs
P
discman
P0
P1
D0 D1
D
Q0
Q1
Q
B) Competitive demand (two goods are in competitive
demand if they are substitutes of each other .)
e.g.Tea and coffee
If the price of the tea decreases, the quantity demanded for
tea will increases,the demand for the coffee will decreases.
P
P
tea
P0
P1
D
D1 D0
Q
Q0
Q1
coffee
Q
C) Derived demand (the demand for factor of production is
derived demand of the product)
e.g.bread and flour
When demand for bread increases,the demand for flour will
also increases .The demand for flour is in fact derived from
the demand for bread .Thus , the demand for flour is known
as derived demand .
P
P
bread
flour
D0 D1
D0 D1
Q
Q
D) Composite demand ( the demand for a good is in
composite demand if the good is demanded for different
purposes .
e.g.steel can be used for building , shipbuilding
Steel for building
P
P
Steel for shipbuilding
P
Composite demand
for steel
D
A
D
Q
B
D
Q
A+B
Q
It is obtained by Horizontal Summation of all individual
demand curves in the market.
Question :
When the price of a CD
decreases, the demand for the
CD increase.
Is this statement correct?
**Students usually mix up a change in demand with a
change in quantity demanded.
Explanation:
A change in quantity demanded is caused by a change in the
price of good concerned.
A change in demand is caused by factors. The whole demand
curve will shift.
Answer:
In this case, the statement is wrong because a decrease in
the price of CD will only cause an increases in quantity
demanded.
Written by :
Celia Chan 4A ( 1 )
Emily Tse 4A ( 32 )
Yammie Fung 4A ( 10 )
2000 - 2001