LAW OF DEMAND SUPPLY AND PRICE

LAW OF DEMAND SUPPLY AND PRICE

ASSIGNMENT 2

HINA BAIG
11655

ECONOMICS

SUPERVISOR: MEHBOOB KHAN

IQRA UNIVERSITY AIRPORT CAMPUS

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LAW OF DEMAND SUPPLY AND PRICE

Contents
LAW OF DEMAND ......................................................................................................................................... 3
FACTOR EFFECTING DEMAND ................................................................................................................... 3
Examples: .................................................................................................................................................. 4
LAW OF SUPPLY ............................................................................................................................................ 5
FACTORS EFFECTING SUPPLY CURVE WITH EXAMPLES ............................................................................ 5
Examples ................................................................................................................................................... 5
LAW OF SUPPLY DEMAND AND PRICE......................................................................................................... 6
Examples of Demand supply Price ............................................................................................................ 6

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LAW OF DEMAND SUPPLY AND PRICE

LAW OF DEMAND

1. The law of demand states: the demanded quantity increases with decrease in price.
2. The relationship between demand and price is determined by Demand Curves
3. If except price of goods, other things changed and demanded is effected then shift in
demand curve is observed.

FACTOR EFFECTING DEMAND

Demand curve effected by several factors
1. Change in income ( inferior goods demand decreases with increase in income)

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LAW OF DEMAND SUPPLY AND PRICE

2. Substitute products (People can use the other substitute product if required)

3. Complementary goods ( Availability of complementary goods tends to increase the

demand )

4. Future expectations ( Alter the pattern of how consumers prefer the buying of goods)
5. Change in environmental conditions ( Alter the pattern of how consumers prefer the
buying of goods)
6. Change in perceived value ( Alter the pattern of how consumers prefer the buying of
goods)

Examples:
1. When prices are dropped, the sales are increased massively like in Black Friday/ Blessed
Friday.
2. Prices of Tomatoes went extreme high hence the demand decreases massively.

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LAW OF DEMAND SUPPLY AND PRICE

LAW OF SUPPLY
 The law of Supply says : When prices get high the supplier tend to produce more
goods.
 Supply Curve determines the relationship of Supply and price

FACTORS EFFECTING SUPPLY CURVE WITH EXAMPLES

1. Price of goods effects supply curve, there is a direct relationship between supply
and price.
2. Cost of Production, supply will decrease with increase in cost of production.
3. Natural conditions, supply of agricultural goods increases when monsoon season
starts
4. Technology, advancement in technology help to increase the production
efficiency
5. Transport condition, good distribution and on time delivery help to maintain the
supply and selling of product.
6. Factor prices and availability, material, man, equipment and machinery are
termed to be as factors, if they are available at low price, it will be beneficial for
production.
7. Government policies, fiscal policy and industry policy have a great impact on
production. As per current condition, high tax implementation and duties are
effecting the production negatively.
8. Prices of related goods, as per current scenario the wheat prices have increased,
the farmers will tend to produce more wheat, which will decrease the supply of
Rice or other related goods.

Examples
1. When customer starts paying more for Face wash ETUDE the supply got increased
but with more high price the customer shift to another product

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LAW OF DEMAND SUPPLY AND PRICE

2. Fountain pen supply and prices rises as customer willing to pay more, was observed
3. Price of chocolate rises due to increase in supply and consumer was ready to pay
more.

LAW OF SUPPLY DEMAND AND PRICE

When all three elements combine, they lead towards equilibrium position. If demand
increases and supply is unchanged, the price is increased and vice versa. If supply
increases and demand remains unchanged, it leads towards lower equilibrium price and
higher quantity and vice versa.

Examples of Demand supply Price

1. Wheat supply got low hence the government/ supplier increase the price because the
demand is in high %