MANAGERIAL ECONOMICS

Instructor:

Prepared By: Khalid Sardar (L5MF14MCOM0003 ) Syed Mudassir Shah (L5MF14MCOM0017 ) Tayyab Hussain (L5MF14MCOM0009)

Prof. Nadeem Bashir

Do we always buy more when prices decreases?

Explain the effect of Tax on market price and quantity demand and Supply?

Calculate P.E.D. & P.E.S. when there is Market Equilibrium ?

Title

Do we always buy more when price decreases?

Title

Context

a) Definitionb) Factors c) Explanationd) Tablee) Graphf) Conclusion

Definition

The Quantity of a commodity that consumer are willing and able to

purchase over a given period of time at each price of commodity is called

demand

Factors

There Are Some Factors Which Increase or Decrease the demand.

a) Price b)income

c) Availability Of Resourcesd)Climatic Conditione) Government Policy

i) Taxii) Subsidies

Serial No. Price Per HamBurger

Demand per Day

1 2 2

2 1.5 4

3 1 6

4 0.75 7

5 0.5 8

Table

The table shows that at the price of 2 per H.B The Quantity demanded is 2. At the lower price 1.5 the quantity demanded is 4. at the price of 1 the quantity

demanded is 6 and the price of 0.75 and 0.5 the quantity demanded is 7 and 8 respectively.

At lower price, greater quantities of H.B are demanded. Each additional H.B consumed per day and provide Extra Benefit. So consumer would only purchase

greater quantities at lower price.

This is particular always true for all commodities, Lower Price will also brings more Consumer into the market.

Quotation

P

D0 2 4 6 7 8

2

1.5

1

0.75

0.5

B

C D E F

Explain the effect of Tax on market price and quantity demand and Supply?

Topic

Content

Effect of Tax on Market Price

Effect of Tax on Quantity Demanded

Effect of Tax on Supply

Tax

Conclusion

What is Tax?

A charge placed on the production of a good and service by the Government. For example petrol is taxed heavily by the Government

Demand

Quantity demanded is the quantity of a commodity that people are willing to buy at a particular price at a particular point

of time.

Effect of Tax on Quantity Demand

The increase in tax will lead a decrease in demand while supply remain constant. Because when Tax impose on product the price of that product increases. So as price increases the Demand of product decreases.

Price

Quantity

P1

Q1

Demand without Tax

Price

Quantity

P1

Q2

Demand with Tax

Demand curve shifts down because the tax .From D1 to D2.

D2D1

Demand will increase if the tax decreases.From D2 to D1.

P2

Q1

Effect of Tax on Price

When Demand Curve Shifts

An increase in demand while holding supply constant will cause a price increase.

A decrease in demand while holding supply constant will cause a price decrease

Supply

supply refers to the amount of a product that producers and firms are willing to sell at a given price when all other factors being held constant.

Effect of Tax on Supply

The increase in tax will lead a decrease in supply. Because when Tax impose on product the price of that product increases. So as price increases the

supply of product decreases.

Supply without Tax

Price

Quantity

P1

Q1

S1D

S2

P2

Q2

A specific leads inward shift in Supply curve

If Tax withdraw from a Product than supply curve shift downward.

Supply with Tax

Effect of Tax on Price

When Supply Curve Shifts

An increase in supply while holding demand constant will cause a price decrease.

A decrease in supply while holding demand constant will cause a price increase.

Market Price

Market price is the price of an product as determined by supply and demand.

Market PriceGraphically Shown As

Where Demand=Supply

Conclusion

From above it is conclude that any type of Tax plays a vital role in the Demand and supply of any Product. For Successful business its very important that their should be minimum tax on any product by Tax authorities.

CALCULATE P.E.D & P.E.S WHEN THERE IS MARKET EQUILIBRIUMa) Definition

b)Derivative

Title

Definition

Market equilibrium is a market state where the supply in the market is equal to the demand in the market. OREquilibrium is That Point Where Demand & Supply Curve Intersect Each other.

How To Drive Price Elasticity Demand & Price

Elasticity Supply At Equilibrium Point.

Lets Take An Example

Condition For Equilibrium

Qd = QsIf Qd is Equal Top = .04q +8 … (i)If Qs is Equal To P = 17 - .02q …(ii)

By Putting the Values Of Qd & Qs We get

.04q+8 = 17 - .02qBy Arranging It.04 + .02 = 17 – 8

.06q = 9Q = 9/ .06

Q = 150

Example

By Putting The Value of Q in Equation (i)

P= .04q + 8P=.04 (150) + 8

P= 6+8P= 14

By Putting Value Of Q in Equation (ii)P= 17 - .02q

P= 17 – 0.2 (150)P= 17 – 3

P= 14

Value Of Price Is Same In Both Demand And Supply Equation. Its mean Value of Price is not change in unless Some Factor Effect the

market Equilibrium.If Qd > Qs

Then there is shortage in MarketIf Qs > Qd

Then There Is Surplus In Market

Conditions