DA COLLEGE FOR WOMEN PHASE VIII

SAIMA NASIRDEPARTMENT OF ECONOMICS

DEMAND AND SUPPLY

TABLE OF CONTENTS

• Law of Demand• Law of supply• Equilibrium Price• Change in Demand• Change in Quantity Demanded• Elastic and Inelastic Demand

Law of Demand

Price & Quantity Demanded: The Law of Demand

Law of Demand:– negative, or inverse relationship– movement along demand curve– change in quantity demanded

Law of Supply

Price & Quantity Supplied: The Law of Supply

Law of Supply:– positive relationship– movement along supply curve– change in quantity supplied

Market Equilibrium

Quantity supplied = Quantity demanded

(No tendency for the market price to change )

Quantity supplied > Quantity demanded

(Excess supply or surplus)

Equilibrium quantity

Equilibrium price

Equilibrium point

Graphs Showing Change in Quantity Demanded

Quantity of X demanded, QdX = f (PX; PY, I, preference, and others)

Demand function (equation):

Factor effecting demandFactor effecting quantity demanded

Change in Demand and Change in Quantity Demanded

Change in Quantity Demanded occur when there is change in price only , keeping all the other factor constant

Change in Demand occur when price remains constant while other factors change .Such as income, preferences, taste, season, price of other related goods

Quantity

D1

D2

ELASTIC AND INELASTIC DEMAND

The flatter curve D1 shows an elastic demand while the steeper curve D2 shows an inelastic demand

The elastic demand shows a greater

relative change in quantity demanded with respect to change in price while an inelastic demand shows a lesser relative change in quantity demanded with respect to change in price

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