Market Forces Demand

Markets

• Markets bring together buyers (“demanders”)

and sellers (“suppliers”).
• Some markets are local while others are
national or international.
• Markets help to determine the prices and
quantities bought and sold of millions of goods
and services.
 Demand

Demand is a schedule or curve that shows the various

amounts of a product that consumers will buy at each of a
series of possible prices during a specific period.
• The Law of Demand states that, all else equal, as price
falls, the quantity demanded rises, and vice versa.
 Demand

A curve illustrating the inverse relationship between the

price of a product and the quantity demanded of it, other
things equal, is the demand curve.
• It slopes downward to reflect the Law of Demand.
 Demand

• Individual demand is the demand schedule or

curve of a single consumer.
• Market demand is the sum of all the individual
demands.
• By adding the individual quantities demanded by
all consumers at each of the various possible
prices, we get the market demand.
Demand
 MOVE SHIFT

Changes in price of the

price of the product is
movement along the
demand curve
 When hamburger price is 40 PHP. People
eat 4 pieces per week 
When the hamburger price falls from 40
Price
pesos to 30 pesos
People eat hamburger ?
50 More Or Less
40 When hamburger price is 40 PHP. People
30 eat 4 pieces per week 
When the hamburger price increase from
20 40 pesos to 50 pesos
10
People eat hamburger?
1 2 3 4 5 6 7 8 More Or Less
Quantity Demand
Independent and dependent
 Demand curve Move  to Left or to Right
Price
Quantity changes due to
1. A decrease
the price changes are $3.00 in price . . .

called movement along 2.50

2. . . . increases quantity
2.00
the demand curve. of cones demanded.
1.50

Only When Price of the product 1.00 Demand curve

Change Demand Curve Move 0.50

0 1 2 3 4 5 6 7 8 9 10 11 12
Movement of the Demand Curve.
Quantity
• 1. Decrease in Price of that product  to increases quantity ( move to the right)
• 2. Increase in Price of that product  to decrease quantity ( move to the left)
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 For Somai Business
When somai price is 30 PHP.

When the price of somai decrease from

Price
30 peso to 20 pesos . Move to left or
right ?
50 When somai price is 30 PHP.

40 When the price of somai become 45

30 pesos from 30 pesos Move to left or
right ?
20
10 When Ice Cream Price increase from 30
pesos to 50 pesos

1 2 3 4 5 6 7 8
Quantity Demand
 Demand

• When a demand curve is drawn, other factors,

called determinants of demand, are held
constant.
• Determinants of demand are factors other than
price that locate the position of a demand curve.
• These include: (1) tastes, (2) number of buyers, (3)
income, (4) prices of related goods, and (5)
expected prices.
There are six things which will effect the
quantity demand.
• Variables that can shift the demand curve
1. Income
2. Tastes or Perception MOVE
3. Prices of related goods
4. Expectations
5. Number of buyers Changes in price of the
price of the product is
movement along the
demand curve

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 You really like Hamburger .Price of Burger
is 35 PHP and you are eating 1
Hamburger per week.
Price Price of your hamburger did not change.
You got additional allowance of 2000 PHP
for that week.
50
40 People eat hamburger
30 ____?

20
10
1 2 3 4 5 6 7 8
Quantity Demand
 Price did not changed but quantity
change on the same price line.
And Create a new demand curve.
Price
It is called
SHIFT of the Demand Curve
50
40
People eat hamburger more. SHIFT to
30 right
20
10 What if your parents deduct the
allowance . Eat more or eat less
1 2 3 4 5 6 7 8
Quantity Demand Therefore shift to the left .
• Therefore , income effect the quantity of the demand .
• Income effect is not demand curve move  it is SHIFT
Normal Goods
• When people’s
• Income increase QTY of normal goods increase  Shift to RIGHT
• Income decrease QTY of normal goods decrease  Shift to LEFT
 These goods are known as inferior goods You really do not like the Burger that you
are eating. But it is the cheapest. You eat
because you only afford this burger .Price
Price of Burger is 35 PHP and you are eating 1
Hamburger per week.
Price of your hamburger did not change.
50 You got additional allowance of 2000 PHP
for that week.
40
30 People eat that
20 hamburger less/ no
eating at all.
10
1 2 3 4 5 6 7 8
Quantity Demand
• Inferior goods are goods that people are consuming only because they
cannot afford others .
• Therefore, when they have money, they do not consume at all or they
consume less.
• When income increase  Inferior goods QTY decrease  shift to left
• When income decrease Inferior goods QTY increase  shift to right
 Hamburger is 50 pesos. You eat burger
once in week
Taste or Perception
Price
No price changes. But there is a research
that eating burger makes your skins glow
50 and getting white . Eat more / eat less

40
30
20
10
1 2 3 4 5 6 7 8
Quantity Demand
 Matte lip sticks is 30 pesos. You buy
matte lip stick 3 sticks in a month
Taste or Perception
Price Majority of the celebrities and magazines
are using glossy lips sticks and
announcing that matte lip sticks days are
50 over. No price changes.
40 Buy more matte lip sticks / buy less

30
20
10
1 2 3 4 5 6 7 8
Quantity Demand
 DVD player Company Your DVD player is 2,000 pesos . That
In this case since TV is time people buy 3,500 units per week.
needed for DVD business
Price ,and TV is expensive and they When all Televisions in the market
cannot buy TV, And it leads increase the price two time.
5k to they don’t need to buy
DVD. That’s why DVD People will buy more DVD player
4k demand shift to left. or buy less DVD player
3k
No changes in price of the product. But
2k the price of related goods change Can
1k effect the quantity demand of your
business .
1k 2k 3k 4k 5k Prices of related goods
Quantity Demand Compliment goods
• You can see this type of relationship as shampoo can conditioner .
They are complement goods
• Bread and butter or Jams
• If you have bread free bread,, you will buy butter or Jam diba… cause
you will spread on the bread.
• So when bread price decrease , people leads to buy bread and which
leads to buy the complement goods such as butter or jam and etcs.
 For Somai Business
When somai price is 30 PHP.
If I were them , I wont eat But near by hot dog store has promotion
somai , I will eat hot dog . So of buy one take three. ( price become low
Price
Somai demand decrease. Shift to in hot dog
left
50
Do you think people will eat somai MORE
40 or LESS?
30
20 Prices of related goods
substitute goods changes
10 This case it is price of related goods
decreased
1 2 3 4 5 6 7 8
Quantity Demand
Variables which will result shift in Demand Curve

• Income-Normal Goods
• Income-Inferior Goods
Tastes
o Prices of related goods- substitute
o Prices of related goods-complement
 For Somai Business
When somai price is 30 PHP.

Price
You eat soimai 3 times a day

50
40 But tomorrow your mom will not give any
allowance
30
20 TODAY Will you eat somai more / less?
10 If tomorrow your mom will give 20,000 .
You will even buy somai for ur friends .
1 2 3 4 5 6 7 8 diba
Quantity Demand
Variables which will result shift in Demand Curve

• Income-Normal Goods
• Income-Inferior Goods
Tastes
o Prices of related goods- substitute
o Prices of related goods-complement
Expectations- Income – people will adjust the today’s buying behavior based
on what will happen tomorrow .
If tomorrow more money will come ,, of course you will start spending today .
So Today’s demand curve shift to right .
If tomorrow there wont be money . The of course you will start spending less
today. And leads to Today’s demand curve shift to Left.
 DVD player Company Your DVD player is 2,000 pesos . That
time people buy 3,500 units per day

Price Tomorrow is DVD company’s

anniversary and there will be 90%
discount and people know it.
5k
TODAY do you think people will buy DVD
4k player?
3k
2k No changes in price of the product
TODAY. But there will be changes in price
1k of the product FUTURE

1k 2k 3k 4k 5k Expectations
Quantity Demand - Price of the product
Variables which will result shift in Demand Curve

• Income-Normal Goods
• Income-Inferior Goods
Tastes
o Prices of related goods- substitute
o Prices of related goods-complement
Expectations- Income
Expectations- Price of the product
Number of buyers
 Somai Shop Your soimai is 20 pesos . That time LPU
canteen’s somai shop sell 3,500 units per
day
Price Today is no junior high school
students and no senior high school
students
50
Do you think LPU canteen’s somai shop
40 can still sell 3,500 units per day?
30
20
NO of Buyers can effect
10
1k 2k 3k 4k 5k
Quantity Demand
Variables which will result shift in Demand Curve

• Income-Normal Goods
• Income-Inferior Goods
Tastes
o Prices of related goods- substitute
o Prices of related goods-complement
Expectations- Income
Expectations- Price of the product
Number of buyers
More population leads to more buyers- then more demand shift right
Less population leads to less buyers  then less demand  shift left
There are six things which will effect the
quantity demand.
• Variables that can shift the demand curve
1. Income
2. Prices of related goods MOVE
3. Tastes
4. Expectations
5. Number of buyers Changes in price of the
price of the product is
movement along the
demand curve

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