DEMAND

ECO 1207 MICROECONOMICS

AUGUST 2020
Lecturer: Ms. Lee Hui Ping
LEARNING OUTCOME

1. Explain how equilibrium prices and goods are determined by using

demand and supply curves analysis.
 A MARKET

….. is a place where buyers and sellers coming together to

exchange goods and services
 INTRODUCTION- DEMAND

DEFINITION

The ability and willingness to buy specific

quantities of goods in a given period of time
at a particular price, ceteris paribus
 LAW OF DEMAND

…. states that the higher the price of a good,

the lower the quantity demanded for that
good and lower the price, quantity demanded
is higher, ceteris paribus
 LAW OF DEMAND (CONT)

When the
price is ↓,
consumers
will buy
more and
vice versa

The relationship between price and quantity demanded is inverse

DEMAND FUNCTION AND DEMAND CURVE
 Demand Schedule  Demand Curve
…………………………………………………… ……………………………………………………
…………………………………………………… ……………………………………………………
…………………………………………………… ……………………………………………………
…………………………………………………… ……………………………………………………
…………………………………………………… ……………………………………………………
…………………………………………………… ……………………………………………………
 DEMAND CURVE

DEFINITION
A downward sloping curve which shows the inverse
relationship between the quantities demanded of a good
and its price

 INDIVIDUAL DEMAND  MARKET DEMAND

- Relationshipbetween the - Relationshipbetween the total
quantity demanded by a single quantity demanded by all consumers
buyer and its price in the market and its price
INDIVIDUAL VS MARKET DEMAND
FACTORS INFLUENCING DEMAND

Income
Seasons and Price of related
Climate good

Determinants
of Demand
Advertisement Taste and
Fashions

Expectation Population
 FACTORS INFLUENCING DEMAND

CNY, fire
i. Income increases, DDnormal ↑
Income of
crackers & ii. Income increases, DDinferior ↓
consumers
mandarin Seasons and
oranges in Two Categories
Climate Price of related
great demand
good i. Substitute goods
ii. Complementary goods
Higher level of Determinants
awareness, Advertisement
demand ↑ of Demand As a good becomes more
Taste and
fashionable, the demand ↑
Fashions

Higher Expectation
of recession in near Expectation Larger population, higher
Population
future, demand ↑ demand
 CHANGES IN QUANTITY DEMANDED VS
CHANGES IN DEMAND
CHANGE IN QUANTITY
DEMANDED
o Movement along the demand curve
o Price changes and other factors are constant
o Upward movement: Decrease in quantity
demanded (contraction)
o Downward movement: Increase in quantity
demanded (expansion)
CHANGE IN DEMAND
o Shift in the demand curve
o Occurs when changes in other factors and
price remains constant
o Increase in demand (DD0→DD1)
o Decrease in demand (DD1→DD0)
 EXCEPTIONAL DEMAND

 Against the law of demand

- where the price increases, demand will Giffen Goods Status Symbol Goods
also increase and vice versa.

Speculation Emergencies