Demand and Supply Economics

INTRODUCTION OF SUPPLY AND DEMAND 
     One of the most important areas of study in business economics is the market.  Producers produce for the market where interaction between demand and supply of a product determines its price.  The price of a product and its sales determines the total revenue, from which the total cost is deducted to arrive at a firm's profit or loss.  A business enterprises, success and failure depend on what price the market sometimes Tor its product. In a market situation, price is determined by S11 Full explained Demand and Supply Economics.
(a) the demand for the product;  and
 (b) the supply of the product on the equilibrium 
  price of a product is the price which itself, that is, at this price, the demand for the product supply.  Every market tends to settle at this equilibrium] understand market equilibrium, we need study mar e price at which the market clears or the product is exactly equal to its equilibrium price at this settlement.  In orde need study market demand and supply.
  1.   DEMAND ECONOMICS
     In economics, demand signifies a desire for a good or a service backed by the ability and willingness to buy a good or service.
     Demand for a good or a service is a function of its price, consumers Income, taste and preferences.  size, population, prices of substitute and complementary products, natural, geographical and social factors.  These factors are termed as determinants of demand.  Of all the determinants, price is the most important.  As such, the relationship between the quantity demanded of the product and its price is studied under demand analysis.  Demand analysis is the starting point of understanding the functioning of the market.
   The relationship between price and demand is an inverse, assuming that the demand for other determinants remains constant.  According to the law of demand, amount demanded varies negatively, or reciprocally, with the value. A demand curve slopes downward because any reduction in price makes consumers;  

(a) more willing to substitute the commodity for other commodities (substitution effect) and 
(b) more able to buy the good because the lorwer price increases real income.

    The quantity demanded of a commodity is always expressed in relation to a price and time period.  For example, 200 pairs of shoes sold at a price of 1500 per pair in a month by a shoe store.  

1.Demand Schedule and Demand Curve               According to the Law of Demand, if we assume that all factors, other than price, remain constant, we can derive a price-demand relationship in a functional form.
     A demand function for price can be expressed as 
Qdx = f (Px)
   Where, Qdx = Quantity demanded of commodity x
P = Price per unit of commodity x

 f denotes a functional relationship 

The linear form of the ion in can be expressed as: 

The above demand has the demand function in ali Qdx = a - b Px.  
     General Chat Chat Lounge  quantity 

where, 
a=quantity demanded when the price is zero

 b = correlation coefficient between and proficient between quantity demanded and price in the above equation,

1) a represents quantity.  Known as the intercept quantity demanded at zero price.  It is a constant and is the intercept parameter. The Demand curve will intersect ecause the X - axis at quantity.
2)  The term b represents ∆Qdx / ∆P.  Note that the inverse relationship between the will benoir between supply and quantity demanded
 Let us suppose, the demand equation is estimated as: 
Qdx = 100 - 10P, 
from the above equation; we can derive the following demand schedule:
Demand Schedule

PRICE PER UNIT
Quantity Demanded in Unit
(Qdx = 100 - 10P)
0
100
1
90
2
80
3
70
4
60
5
50
6
40

The schedule indicates the demands inverse price - demand relationship. A demand curve can be derived A demand by plotting the points on a graph. In the above example, the demand curve is linear, but the demand curve can be linear.
But demand curve can also be non be nonlinear.
Explain Demand curve

Understanding Supply and demand, in economics, the relationship between the quantity of a commodity that producers wish to sell and the quantity that consumers wish to buy.and Law of Supply and Demand.
Demand Curve

2.  Individual and Market Demand
 In the above example, the demand curve is an individual demand curve representing the demand of an individual consumer.  If we sum up the demand for a product of all consumers, we get the market demand curve.

    Changes in Demand
Movement along the demand curve: When the price of product changes, with no change in the demand of other determinants, it can be shown by movement on the same demand curve.  Thus, other things remaining constant, if the price falls, the quantity demanded will rise (extension of demand) and if the price rises, quantity demanded will fall (contraction of demand).  (refer Chapter 3).  

  Shifts in the demand curve: 
    The demand curve will shift upward (to the right) or downward (to the left) when there is a change in the demand of non-price determinants.  For example, if consumers income increases, then there will be an increase in demand at the same price and the demand curve will shift upward.  On the other hand, for example, there is a decline in consumers' income, there will be a decrease in demand at the same price and the demand curve will shift downward.  Similarly, other non-price factors can cause gifts in the demand curve.

Market Demand In Fig.  2. 2DDI At the same pric dentand.  Atthe Hot Demand and Supply Mpp is the initial demand cure Hame price Pr more is demand.  A. Arthe same price Pr, lessisdem Acurve, DD shows increase in demand. demanded (= OQ). DD shows decrease in Messisdemanded (300).

 In Fig 2.2 DD is the initial demand curve D1D1 show increase in demand at the same price p1 more is demand ( =OQ1),D2D2 decrease in demand at the same price P1,less is demanded ( =OQ2)

Understanding Supply and demand, in economics, the relationship between the quantity of a commodity that producers wish to sell and the quantity that consumers wish to buy.and Law of Supply and Demand.
Initial Demand Curve

2. SUPPLY ECONOMICS
Supply refers to the commodity of various quantities that a producer will offer for sale at different times at different relevant prices.  The most important anal derivative of the Law of Supply is the governance of prices, related goods, cost infrastructure. A commodity depends on a number of factors such as its price, leased goods, cost of production, state of technology, time period, Acture, government policies, natural factors.  Of all the factors, price an important and hence, the price - supply relationship is used to
The relationship between price and supply is direct, assuming Minidirect.  Assuming that the supply of other determinants remains constant.

Supply Schedule and Supply Curve 
    As per the Law of Supply.  If we assume that all factors, other than price remain constant, we can derive a price - supply relationship in a functional form. 
 A supply function for price can be expressed as Qsx = f (Px) 

Where, Qsx = Quantity supplied of commodity x
Px= Price per unit of commodity x
 f= denotes a Functional relationship

 The above supply function can be expressed as a Qsx = -  c + d Px

 where c= quantity supplied when price is zero 
d = correlation coefficient between quantity supplied and price 

In the above equation,
 i) c = quantity supplied at zero price (c represents quantity intercept of | supply curve. It will  Always be negative since ata price of zero, no | producers are willing or able to supply a product) 
(ii) The term d representsAQ.  General Chat Chat Lounge JAP, note that d will be positive because |  of the direct relationship between price and quantity supplied.
  Let us suppose, the supply equation is estimated as:
                   Qsx = - 40 + 30P

From the above equation we can derived by following supply schedule

PRICE PER UNIT
Quantity Supply in Unit
(Qsx =  - 40+30Px)
0
-40
1
-10
2
20
3
50
4
80
5
110
6
140

The schedule indicates the direct price - supply relationship.  A supply curve can be derived by plotting the points on a graph.  In the example above, the supply curve is linear, but the supply curve can also be non-linear.  (The Supply curve can be extended to the negative axis, as at zero or very low price, no quantity will be supplied, unless the commodity is subsidized by the government.) Fig.  23explains is a representative supply curve.

Explain Supply curve
Understanding Supply and demand, in economics, the relationship between the quantity of a commodity that producers wish to sell and the quantity that consumers wish to buy.and Law of Supply and Demand.
Supply Economics Graph

  Individual and Market Supply Curve
 In the above example, the supply curve is an individual firm's supply curve, it sums up the supply of all the producers of the product in the market, we get the market supply curve.

  Changes in Supply
a. Movement along the Supply Curve: 
When the price of a product changes, with no change in the supply of other determinants, it can be shown by movement on the same supply curve.  Thus, if other things remain constant, if price falls, producers will supply less (contraction of supply) and if the price rises, more will be supplied (extension of supply).  (Fig. 2. 3)
 b.  Shifts in the supply curve:
 The supply curve will shift to the left or to the right when there is a change in the supply of non-price determinants.  For example, if material costs rise, producers will have to cut down on production.  Therefore, at the same price will be less supplied and the supply curve will shift to the left or supply will decrease.  On the other hand, if for example, there is a fall in material costs, then producers will be able to supply more at the same price.  This will make the supply curve move to the right or there will be an increase in supply. Similarly, other non-price factors can cause shifts in the supply curve.  (Fig. 2. 4)
Understanding Supply and demand, in economics, the relationship between the quantity of a commodity that producers wish to sell and the quantity that consumers wish to buy.and Law of Supply and Demand.
initial supply curve 

In Fig.2.4 SS is a initial supply curve S1S1 decrease in supply at the same price P1 Less in supply( =OQ1),S2S2 is increased in supply at the same price P1 more is supplied (=OQ2)



0 Comments: