micro economics demand and supply-market equilibrium

7/27/2019 Micro Economics Demand and Supply-Market Equilibrium

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D.B.NAIDU

MICRO ECONOMICS

DEMAND AND SUPPLY-MARKET EQUILIBRIUM
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I. INTRODUCTION

Demand and Supply is one of the

most fundamental concepts of economics and it isthe backbone of a market economy.

The relationship between demand and supply

underlie the forces behind the allocation of

resources. In market economy, demand and

supply theory will allocate resources in the most

efficient way possible.


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II. CONCEPT OF DEMAND

It refers to both the ability to pay and a

willingness to buy by the consumer (s). Demandis sometimes called effective demand. Demand

can be shown by a demand schedule which

shows the maximum quantity demanded (willing

& able to buy) at all prices.


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TASTES
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INCOME OFTHE BUYER
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WEATHER
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PRICES OFRELATED

PRODUCTS
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THE NUMBER

OF BUYERS IN

THE MARKET


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DEMAND SCHEDULE

A demand schedule is a table showing thequantities of a good that a consumer would

buy at all different prices within a time

period, ceteris paribus.


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A DEMAND SCHEDULE FOR A

GOOD OF A CONSUMER

Price ($ per unit) Quantity Demanded

30 2

20 4

15 6

12 8

10 10

8 12


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MARKET DEMAND SCHEDULE

Price

(Rs. per unit)

Quantity Demanded

RAM SYAM Market (i.e. R + S)

30 2 1 3

20 4 3 7

15 6 5 11

12 8 7 15

10 10 9 19


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LAW OF DEMAND

The relationship between prices and quantity

demanded is called the law of demand in

economics. The law of demand states that, if

all other factors remain equal, the higher the

price of a good, the less people will

demand that good. In other words, the higher

the price, the lower the quantity demanded.


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LAW OF DEMAND CURVE


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THE MOVEMENT ALONG A DEMAND CURVE:

CHANGE IN QUANTITY DEMANDED


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THE SHIFT OF A DEMAND CURVE:

CHANGE IN DEMAND


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FACTORS AFFECTING A CHANGE IN

DEMAND

A SHIFT OF DEMAND CURVE

1) Prices of Related Goods

2) Income3) Taste

4) Weather

5) Expectations of Future Price

6) Derived Demand7) Size of Population


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III. CONCEPT OF SUPPLY

It refers to both the ability to sell (produce)

and the willingness to sell by the producer (s).

Supply implies an effective supply. Supply can be

shown by a supply schedule which shows the

maximum quantity supplied at all different prices.


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SUPPLY SCHEDULE

Price (Rs. per unit) Quantity Supplied

10 2

18 4

28 6

40 8

50 10


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MARKET SUPPLY SCHEDULE

Price

(Rs. per unit)

Quantity Supplied

RAM SYAM Market (i.e. R + S)

10 2 3 5

18 4 5 9

28 6 8 14

40 8 10 18

50 10 11 21


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LAW OF SUPPLY CURVE


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THE SHIFT OF A SUPPLY CURVE

CHANGE IN SUPPLY


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TIME AND SUPPLY


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III. DEMAND & SUPPLY ANALYSIS

DEMAND AND SUPPLY RELATIONSHIP

With demand & supply in a market, the

interaction between market demand & supply

together will determine the market price of a good.

CONCEPT OF MARKET PRICE


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DETERMINATION OF EQUILIBRIUM

PRICE & QUANTITY IN A MARKET

Price (Rs. per unit) Quantity

Demanded

Quantity Supplied

60 200 1100

50 400 900

40 600 700

30 800 500

20 1000 300

10 1200 100


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EQUILIBRIUM

When supply and demand are equal (i.e. when the

supply function and demand function intersect) the

economy is said to be at equilibrium. At this point,

the allocation of goods are at its most efficient use

because the amount of goods being supplied is

exactly the same as the amount of goods beingdemanded.


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EQUILIBRIUM

DIAGRAM


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1. EXCESS SUPPLY
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2. EXCESS DEMAND
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FAMOUS STUDENTS OF

ECONOMICS

1. Dadabhai Naoroji

2.MahadevGovind Ranade

3.Dr. B.R. Ambedkar4. C.N. Vakil

5. D.R. Gadgil

6. B.R. Shenoy

7. V.K.R.V. Rao

8. Malcolm S Adiseshiah9. P.R. Brahmananda

10. Amartya Kumar Sen

Ronald Reagon- Former President of USKofi Annan - Former Secretary General(UN)

Arnold Schwarzenegger-Governor of California
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micro economics demand and supply-market equilibrium

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