Unit 3 - PRINCIPLES OF ECONOMICS

3.2 Micro-Economics
(Demand & Supply)

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 DEMAND & SUPPLY
 Demand
 It is the consumers' willingness and ability to buy a given
good at given prices.

 Supply
 It is the quantity of goods a firm offers to sell in the market
at a given price

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 DETERMINANTS OF DEMAND
 Price of own goods
 Income
 Consumer preferences
 Number of buyers
 Price of related goods
 Expectation of the future

When these factors change, demand also will change

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 LAW OF DEMAND
 When other factors (Income, Preseferences, Price of
related goods, Number of buyers, expectations) remain
constant there’s an inverse relationship between the Price
and the Quantity demanded. i.e. When Price increases,
quantity demanded decreseases, and when Price
decreases, quantity demanded increases.

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DEMAND SCHEDULE & DEMAND CURVE
Quantity
Price Per unit demanded
27 10
24 13
21 18
18 25
15 37
12 58
9 94
6 162
3 275

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 DETERMINANTS OF SUPPLY
 Price of own goods
 Production cost
 Technology
 Number of sellers
 Expectation of sellers
 Government policies (Tax/ Subsidies)

When these factors change, the supply also will change

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 DETERMINANTS OF SUPPLY
 Price of own goods
 Production cost
 Technology
 Number of sellers
 Expectation of sellers
 Government policies (Tax/ Subsidies)

When these factors change, the supply also will change

7
 LAW OF SUPPLY

 When other factors (Production cost, Technology,

Number of sellers, expectations of sellers, governmet
policies) remain constant there’s a direct relationship
between the Price and the Quantity supplied. i.e. When
Price increases, quantity supplied increases, and when
Price decreases, quantity supplied decreases.

8
SUPPLY SCHEDULE & SUPPLY CURVE
Price Per Quantity
Unit Supplied
30 350
27 330
24 300
21 240
18 190
15 140
12 70
9 20
6 0