1.

THE MARKET

WHAT IS A MARKET?

An arrangement or a situation where buyers and

sellers and communicate and exchange goods and
services into money.

WHO ARE CALLED BUYERS?

Individuals and group of individuals those who

demand for goods and services.
They

have a desire to buy.

They

have a willingness and ability to buy.

WHO ARE THE SELLERS?

Individuals and group of individuals those who

supply goods and services.
They

have a desire to sell.

They

have a willingness and ability to sell.

WHAT IS DEMAND

Desire backed by willingness and ability to buy,

meaning different quantities of a good or services
demanded at different price levels.
Price
2
4
6
8
10

Qd

100
80
60
40
20

THEORY OF DEMAND

When the other factors remain unchanged higher

the price, lower the quantity demand and lower
the price, higher the quantity demand.

Price

Qd

100

10

20

THE RELATIONSHIP BETWEEN

PRICE AND QUANTITY DEMAND.

Price of a good and quantity demand has an

inverse relationship.

FACTORS AFFECTING DEMAND

(FACTORS DETERMINE DEMAND)
Price
Prices of substitutes
Prices of complementary
Taste and fashion
Consumers disposable income
Size of the population
Interest rate
Advertising
Weather conditions

WHAT IS A DEMAND CURVE?

A graphic representation which shows the

inverse relationship between price and quantity
demand.
Price

Quantity Demand

EXTENSION OF DEMAND
A RISE IN QUANTITY DEMAND

When the other factors remain unchanged, a fall

in price will lead to a rise in quantity demand.
Price

D
Quantity demand

CONTRACTION OF DEMAND
A FALL IN QUANTITY DEMAND

When the other factors remain unchanged, a rise

in price will lead to a fall in quantity demand.
Price

D
Qd

A MOVEMENT ALONG DEMAND

CURVE
Only one demand curve

Extension of demand

The other factors remain unchanged

Only one demand curve

Price falls.

Quantity demand rise.

Contraction of demand
The other factors remain
unchanged

Price rise.

Quantity demand falls.

MOVEMENT OF DEMAND CURVE TO ITS RIGHT

RIGHT SHIFT/OUTWARD SHIFT

When the price remain unchanged, due to a favorable

change in the other factors the demand curve move to
its right.
Price

D1

D2