law of demand and supply in economics ppt

law of demand and supply ppt and law of demand ppt slides
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Published Date:25-07-2017
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CPT Section C General Economics Chapter 2 Unit 1 CA. Shweta Poojari Price is the most important determinant of demand. A “demand curve” plots combinations of prices and quantity demanded. A shift in price causes a movement along the demand curve Changes in income can increase or decrease demand. Goods whose demand decreases with an increase in income are called an “inferior goods.” Goods whose demand increases with an increase in income are called a “normal goods.” An increase in income will reduce the demand for ramen noodles or inferior products. An increase in income will increase the demand for cars or clothing. An increase in income will significantly increase the demand for air travel or jewelry. An increase in the number of potential buyers will increase the demand for the good. For example, the demand for land increases as the population increases. Similarly movie tickets are generally more expensive in larger cities. An increase in the expected future price of goods increases current demand. A decrease in the expected future price of goods decreases current demand. For example, when goods is temporarily put on sale, people stock up on the goods. Demand curves can shift due to changes quality. At a given price, demand for Nike shoes is higher than the demand for any other sports shoe brands. Similarly, CDs cost more than cassettes because the music is of higher quality. Demand curves do not shift due to changes supply. Shifts in supply change the equilibrium price causing a shift along the demand curve. Shifts in supply cause a change in the quantity demand not a shift in the demand curve.  Supply decreases, price increases  The demand contracts ,  Move from Red to Yellow  If Supply increases, price  Falls, the demand expands  Moves from Red to Blue. Individual Demand • Individual demand refers to quantity demanded of a commodity at a given price, by an individual consumer. Market Demand: • Market demand is the aggregation of individual demand. the claim that the quantity demanded of goods falls when the price of the goods rises & vice versa can be explained in the following demand schedule. Demand for PRICE mangoes (RS./KG) (Kg / week) The table that shows the relationship 30 5 between the price of a commodity and the quantity demanded 25 10 Example: 20 15 Individual Demand for mangoes. 15 20 10 25 P R I C E The Demand Curve is downwartd sloping O f from Left to Right , Indicating Negative Relationship between Price and Quantity Demanded of a commodity. M A N G O E S Qty demanded of mangoes Movement Along the same Demand curve. 3 P Also Known as Contraction R or Expansion In Demand . I 2 C E 1 3 6 9 Quantity demanded No Change in Income of the Consumer No Change in Tastes ,Habbits & Preferences of the Consumers Prices of related goods remain unchanged The Commodity No Change in No Change in should be a Size and Distribution of normal Composition of Income commodity. Population No Future The Consumer Expectations should be a about price rational person. changes. Due to changes in Due to changes in Price factors other than price Expansion / Extension in Increase in Demand demand Contraction of Demand Decrease in Demand In the Above two cases the In the above Cases the demand Moves along the Demand Curve itself Shifts Same Demand Curve either to the Left or Right. Suppose the number of P 30 buyers or Income increases., price 25 remaining same 20 Then, at each Price, qty demanded will 15 increase (by 5 in this example). 10 5 THE MARKET FORCES OF Q SUPPLY AND 0 5 10 15 20 25 30 DEMAND 24

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