PREPARED BY: ROSMAH BT ABD GHANI @ ISMAIL

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1. 2. 3. 4.

Free Goods Economic Goods Public Goods Services

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1.
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Free Goods
Goods that have no production cost E.g: sunlight, rainwater

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Economic Goods
physical goods made by man involve a production cost E.g : textbook, shoes

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Public Goods
goods that have a common use & are benefit to everyone E.g : public clinics, school, roads

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Services
Intangible things ( with value), can’t be seen & touched E.g : medical care, education
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Inferior

Related goods
• Substitute • complementary

Necessity

Types of goods

Luxury

Normal

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 Concept of goods AlTayyibat • Good. “Divine bestowal”. or “Heavenly gifts” • Allah is the only Sustainer and Provider for all creatures • Goods which cause wastage/extravagance 5 . Al-Rizq Tarafiah • “Godly sustenance”. clean & pure things • The ethical and spiritual values of consumer goods.

Goods that enhance the quality of life Dharuriyah -goods which fulfill our basic needs 6 . Classification of goods based on hierarchy of needs Kamaliyah Goods that contribute towards the perfection of life Hajiyah .

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Definiton ∆ DD vs ∆ QD Law of DD Determinants How to draw 8 .

 The ability & willingness to buy G&S for a given price at a certain time period. 9 . ceteris paribus.  Desire to buy goods or services with ability and willingness to pay Definition of quantity demanded (Qd)  The amount (number of units) of a goods or services that a household would buy in a given time period if it could buy all it wanted at the current market price.

Qd ↑) with all else equal or ceteris paribus 10 . the quantity demanded decreases (P↑. the quantity demanded increases (P ↓. Negative relationship between price (P) and quantity demanded (Qd)  As price rises.Qd↓) and  As price falls.

 A demand schedule is a table showing how much of a given product a household would be willing to buy at different prices. Demand for corn Price (RM) 5 4 3 2 1 Qd (per kg) 10 20 35 55 80 11 .  Demand curves are usually derived from demand schedules.

 The law of demand states that there is negative relationship between price and the Qd  This means that the demand curves slope downward D Qd (kg) 12 .Demand for corn Price (RM )  The demand curve is a graph illustrating how much of a given product a household would be willing to buy at different prices.

Price (RM) Qd (kg) 13 .

Price of Corn P CORN $5 P $5 4 3 2 1 QD 10 20 35 55 80 4 Plot the Points 3 2 1 o 10 20 30 40 50 60 70 80 Quantity of Corn Qd 14 .

Price of Corn P CORN $5 P $5 4 3 2 1 QD 10 20 35 55 80 4 Plot the Points 3 2 1 o 5560 70 80 10 20 30 40 50 Qd 15 Quantity of Corn .

Price of Corn P CORN $5 P $5 4 3 2 1 QD 10 20 35 55 80 4 Plot the Points 3 2 1 o 10 20 30 40 50 60 70 80 35 Quantity of Corn Qd 16 .

Price of Corn P CORN $5 P $5 4 3 2 1 QD 10 20 35 55 80 4 Plot the Points 3 2 1 o 10 20 30 40 50 60 70 80 Quantity of Corn Qd 17 .

Price of Corn P CORN $5 P $5 4 3 2 1 QD 10 20 35 55 80 4 Plot the Points 3 2 1 o 10 20 30 40 50 60 70 80 Quantity of Corn Qd 18 .

Price of Corn P CORN $5 P $5 4 3 2 1 QD 10 20 35 55 80 4 Connect the Points 3 2 1 D 10 20 30 40 50 60 70 80 Quantity of Corn o Qd 19 .

Individual demand is the demand of one buyer in a market at various prices Market demand is the sum of demands of all buyers in a market at various prices 20 .

Price (RM/KG) Quantity demand Consumer A Consumer B 8 6 4 2 1 Consumer c 6 5 4 2 1 Market demand 1 2 3 4 5 10 8 6 4 2 24 19 14 8 4 21 .

1.Non-price factors 22 .Price factor 2.

Price Factor: Price Itself Law of demand:  As price rises.1.Qd↓) and  As price falls.Qd ↑) with all else equal or ceteris paribus  Negative relationship between price and quantity demanded 23 . the quantity demanded increases (P ↓. the quantity demanded decreases (P↑.

Non-price Factors i. Seasonal factor .1. Taste and preference iv. The price of related goods ii. The number of buyers in the market/ population v.expected future price 24 . Consumer’s income iii.

Qd palm oil↓. Dsoybean oil↑ P P P1 P0 P0 D0 Q1 Q0 Qd D0 Q0 Q1 D1 Qd . Price of related goods  Substitute -Goods that can serve as replacements for one another -When the price of one increases.i. demand for the others goes up -Example: palm oil and soybean oil are substitutes so the demand for soybean oil increases when the price of palm oil rises Ppalm oil↑.

 Complements -Goods that ‘go together’ -A decrease in the price of one results in an increase in a demand for the other. D ink↓ P P P1 P0 E1 E0 P0 D0 Q1 Q0 Qd Q1 Q0 D1 D0 Qd 26 . so the demand for ink decreases when the price of pen rises Ppen↑. vice versa. -Example: Pen and ink are complements. Qd pen↓.

and other forms of earnings in a given period of time As income increases the demand for most goods will increase With an increase in income. Normal good: when income increase. consumers have the purchasing power to demand for more goods -Two types of goods a.ii. Example: cloth b. Example: used car. bundle shirt Taste and preference What people like and dislike without regard the budgetary consideration of price and income As preference change.    Income is the sum of all households wages. demand will change Example: changes in people lifestyle iii. demand for this good decrease. salaries.    27 . demand for this good also increase. Inferior/ giffen: when income increase.

iv. demand for mandarin oranges will increase 28 .   The number of buyers in the market/ population The greater the number of buyers in a market. demand for certain product will increase Example: During Chinese New Year. the demand will increase Example: the demand for parking spaces Seasonal factor During festive seasons.   v.

Qd↓  change in price of a good or service leads to change in Qd preference.Changes in Qd  Def: Movement along the same Changes in demand  Def: Shift of demand curve  Factor influence is non-price demand curve  Factor influence is price determinants -price will remains constant  change in income. taste and determinant -Example:P↑. and price of related goods leads to change in demand 29 .

Rightward: increase in demand from Qo to Q1 (Do to D1). Occurs when -price of substitute good ↑ -price of complement good ↓ -consumer’s income ↑ -expected future price ↑ (etc…) 2.Changes in Qd Price C P1 Po P2 Qo Two types of movement: Q1 contraction A expansion Changes in demand Price P D2 Do Q1 D1 Qd B D Q2 Qd Two types of shifting Q2 Qo 1. Occurs when (vice versa from rightward) 30 .Expansion: occurs when P decrease leads to an increase in Qd (downward movement) from Qo to Q2 (A to B) 2.Leftward:decrease in demand from Qo to Q2 (Do to D2).Contraction: occurs when P increase leads to a decrease in Qd (upward movement) from Qo to Q2 (A to C) 1.

31 . Amount of a particular product or service that firm would be willing and able to offer/sell at a particular price Definition of quantity supplied (Qs)  represents the number of units of a product that a firm would be willing and able to offer for sale at a particular price during a given time period.

32 .Qs ↑) and  As price falls. the quantity supplied will also increase (P↑.Qs ↓) with all else equal or ceteris paribus  The law of supply states that there is a positive relationship between price and quantity of a good supplied. As price rises. the quantity supplied will fall (P ↓.

00 4. 33 .75 2.Yes’s supply schedule for soybeans Price (USD per bushel) 1.00 Qs (thousands of bushels per year)  A supply schedule is a 10 20 30 45 table showing how much of a product firms will supply at different prices.25 3.  Supply curves are usually derived from supply schedules.

75  A supply curve is a graph illustrating how much of a product a firm will supply per period of time at different prices  supply curves have a positive slope 10 20 30 45 Thousands of bushels of soybean produced per year 34 .25 1.00 3.Yes’s supply Price (USD per bushel) S 4.00 2.

Individual supply is the supply of one seller in a market at various price Market supply is the sum of all the quantities of a good or service supplied per period by all the firms selling in the market for that good or service. 35 .

1. Price factor 2. Non-price factors 36 .

Qs ↓) with all else equal or ceteris paribus  positive relationship between price and quantity of a good supplied 37 . the quantity supplied will fall (P ↓.Qs ↑) and  As price falls. the quantity supplied will also increase (P↑. As price rises.

Cost of production/ prices of raw material Technological advancement Government policies Price of other goods Number of suppliers Climatic condition Expected future price 38 . iv.i. ii. iii. vi. v. vii.

thus supply will decrease Technological advancement Generally will increase the supply of product Technology advancement reduces the use of input and cost of production. which in turn depends on the piece of required inputs (labour. the cost of production will increase. capital and land) Example: when the wages of workers increase. so more output can be produced using the same amount of input and cost 39 .   ii.   Cost of production/ prices of raw material The cost of producing the good.i.

    Government policies Taxes imposed by the government on certain goods will reduce supply on the market Disincentives to producer because it increase the cost of production Example: Tax on cigarettes Price of other goods Substitute good: an increase in the price of substitute good.    iv.iii. decreases the supply of the good Example: when the prices of soybean oil increase. the supply of soybean oil produce will be increase and the supply of palm oil will be decrease Complements good: an increase in the price of the good will increase the supply of other good Example: shuttlecock and racket 40 .

Climatic condition  Especially in agricultural and fishing industry vii. Expected future price  If the producers expect in the near future will increase.Number of suppliers  The larger the number of suppliers supplying a good. 41 . supply for today will reduced and vice versa v. the larger is the supply of the good  Example: increase in stationary shop in Perak will increase the supply of stationary good in Perak vi.

Qs ↑  change in price of a good or service leads to change in Qs technology or prices of other goods leads to change in Qs 42 . determinant -Example:P↑.Changes in Qs  Def: Movement along the same Changes in supply  Def: Shift of supply curve  Factor influence is non-price supply curve  Factor influence is price determinants -price will remains constant  change in cost. input prices.

0ccurs when (vice versa from rightward) 43 . Occurs when -price of substitutes good ↓ -price of complements good ↑ -expected future price ↓ -when gov gives subsidies 2.Contraction: P decrease leads to a decrease in Qs (downward movement). from A to C Two types of shifting 1.Leftward:decrease in demand from Q2 to Q1 (S2 to S1).Rightward: increase in supply from Q2 to Q3(S2 to S3). from A to B 2.Changes in Qs Price (P) P2 P1 P0 C Qo S B A expansion contraction Q1 Q2 Qs Changes in supply Price (P) S1 S2 S3 P Q1 Q2 Q3 Qs Two types of movement: 1.Expansion: P increase leads to an increase in Qs (upward movement).

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