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LOGIC > HUM

LOGIC > HUM

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Published by: api-3709182 on Oct 18, 2008
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03/18/2014

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HANDOUT\u2019S OF
ECONOMIC\u2019S
PRESENTATION

PRESENTED BY:
UMAR HASSAN
MOAZEM IFTEKHAR
HAMZA AYYUB

1
DEMAND
Demand refers to the quantity of goods that potential purchasers would
buy or attempt to buy while having buying or purchasing power.
DEMAND SCHEDULE

It represents the amount of a good that buyers are willing and able to purchase at various prices, assuming all other non-price factors remain the same. The demand curve is almost always represented as downwards-sloping, meaning that as price decreases, consumers will buy more of the good.

The main determinants of individual demand are the price of the good, level of income,
personal tastes, the price of substitute goods, and the price of complementary goods.
The shape of the aggregate demand curve can be convex or concave, possibly depending
on income distribution.
DEMAND CURVE
2

The demand curve can be defined as the graph depicting the relationship between the price of a certain commodity, and the amount of it that consumers are willing and able to purchase at that given price (demand).

Demand curves are used to estimate behaviors in a competitive markets, and is often combined with supply curves, often to estimate the equilibrium price (The price at which all sellers are able to find a willing buyer, also known as equilibrium price and market clearing price) and the equilibrium quantity (the amount that good or service that will be produced and bought without surplus/excess supply or shortage/excess demand) of that market. Please see the article on Supply and Demand for more details on how this is done.

This negative slope is often referred to as the "law of demand," which means that when all things but price are held equal, if the price of the good/service increases, the less of that good/service will be purchased by consumers.

CHANGES IN MARKET EQUILIBRIUM
Practical uses of demand analysis often center on the different variables that change
equilibrium price and quantity, represented as shifts in the respective curves.
DEMAND CURVE SHIFTS

An out- or right- shift in demand changes the equilibrium price and quantity

3

People increasing the quantity demanded at a given price is be referred to as an increase in demand. Increased demand can be represented on the graph as the curve being shifted right, because at each price point, a greater quantity is demanded, as from the initial curveD1 to the new curveD2. An example of this would be more people suddenly wanting more coffee. In the diagram, this raises the equilibrium price fromP1 to the higherP2. This raises the equilibrium quantity fromQ1 to the higherQ2. In standard usage, a movement along a given demand curve can be described as a "change in the quantity demanded" to distinguish it from a "change in demand," that is, a shift of the curve. In the example above, there has been an increase in demand which has caused an in increase in ( (equilbrium) quantity. The increase in demand could also come from changing tastes, incomes, product information, fashions, and so forth.

Conversely, if the demand decreases, the opposite happens: a lefward shift of the curve. If the demand starts atD2 and then decreases toD1, the price will decrease and the quantity will decrease&mdash. Notice that this is purely an effect of demand changing. The quantity supplied at each price is the same as before the demand shift (at both Q1 and Q2). The reason that the equilibrium quantity and price are different is the demand is different. At each point a greater amount is demanded (when there is a shift from D1 to D2).

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