SUPPLY AND

DEMAND
Noora Al Arif
 When businesses are considering
the price of their products and
services, they will often look at
supply and demand.

Supply looks at the price setting

point of view of the business
Supply & Demand (producer).

Demand looks at the same process

from the point of view of the
consumer (customer).
Demand
• As the price for the mars bar increases
the quantity demand falls, Vice Versa, So
if the price of the mars bar falls the
quantity demand will rise as they are
cheaper.
• E.g. A graph shows the demand curve is
downward sloping because as the price of
the mars bars increase, less people are
prepared to pay the higher prices, so
demand decreases. Therefore the
company should think carefully what price
to sell their chocolate bars.
Supply

The amount of goods that producers are willing to supply/sell at any given
price. Virtually all cases supply increases as price increases and vice versa.

This is because producers are aiming to make profit. *If the good is sold at a
high price they will make more profit (more money in product)*. If it is sold at
a low price, they will make very little profit or even loss (less money in pocket).
Supply Examples

• For Example the supply curve is upward

sloping (positive correlation). This means that
businesses want to supply their products at the
highest possible price. This is so that it earns
them the most amount of profit, However
thinking back to the Demand curve, customers
want to pay the lowest price so there has to be
an Equilibrium.

• Price Equilibrium is found where supply and

demand are equal. This is the point where
both sellers and buyers come to agreement
with the price and quantity.
Shifters of Demand and Supply

Shifters of Demand: Shifters of Supply:

1. Tastes/Prefernces 1. Price of Resources
2. Number of Consumers 2. Number of Producers
3. Price of related goods 3. Technology
4. Income 4. Taxes & Subsidies
5. Expectations 5. Expectations
Supply and Demand Graph