Demand and Supply

Back to: ECONOMICS SS2

 

Welcome to class! 

In today’s class, we will be talking about demand and supply. Enjoy the class!

DEMAND AND SUPPLY

CONTENT

• Change in Quantity Demanded
• Change in Demand
• Change in Quantity Supplied
• Change in Supply
• Effects of change in demand and supply on equilibrium price and quantity

CHANGE IN QUANTITY DEMANDED

A change in quantity demanded, is otherwise known as movement along a particular demand curve that is only influenced by price. When there is a change in the quantity demanded, the demand curve does not shift. This is because the price of the commodity is the only cause of a change in the quantity demanded while other factors remain unchanged.

CHANGES IN DEMAND

When different quantities of goods and services are demanded at a particular price, it is called a change in demand. It is caused by those factors that generally affect the demand of a commodity other than the price of the commodity; For example changes in taste and fashion, changes in income etc Change in demand shows a shift of the demand curve to an entirely new position. A shift of the demand curve to the right is termed an increase in demand while a shift of the demand curve to the left is a decrease in demand.

CHANGES IN QUANTITY SUPPLIED

Change in quantity supplied is only influenced by price. It involves movement along the same supply curve

 

EFFECTS OF CHANGES IN DEMAND AND SUPPLY ON EQUILIBRIUM PRICE AND QUANTITY

Changes in demand and supply lead to a change in the equilibrium price. Once there is any change in either demand or supply, the initial equilibrium will be disrupted and a new equilibrium will be created. The market equilibrium price can be affected in the following ways

Effects of Decrease in Supply

1. Increase in the equilibrium price from P₁ to P₂
2. A decrease in the equilibrium quantity from Q₁to Q₂

Decrease in demand and decrease in supply.

1. Increase in demand and decrease in supply. 

 

In our next class, we will be talking about the Elasticity of Demand.  We hope you enjoyed the class.

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