Demand and

Supply Analysis
Demand and supply analysis is the study of how
buyers and sellers interact to determine transaction
prices and quantities

What is demand?
It refers to the various quantities of a good that a
consumer is willing and able to buy.
Demand Function
- specifies the relationship between the price of the
good and the various quantities that a consumer is
willing and able to buy
- represents consumer demand in mathematical form.
Qdx = f (Px) where;
Qdx = quantity demanded of good x
Px = price of good x
Demand Schedule and Demand Curve
 
Demand schedule is a table of the quantity
demanded of a good at different price levels.

Demand curve is the graphical illustration of a

demand schedule.
Demand Schedule and Demand Curve
Price Elasticity of Demand
- measures the percentage change in the quantity
demanded when price changes by 1%.
= Percentage change in quantity demanded
Percentage change in price

ED = Qd / Q
P/ P
where: Qd = new quantity demanded – old quantity demanded
Q = old quantity demanded + new quantity demanded
2

P = new price – old price

P = old price + new price
2
Types of Demand Elasticity
• Elastic Demand
• Inelastic Demand
• Unit – elastic Demand
• Perfectly Elastic Demand and Perfectly Inelastic
Demand
Price Elasticity of Demand and Total Revenue
Value of Definition Price TR
Demand
Elasticity
<1 (inelastic) Percentage change in If price increases Total revenues increase
quantity demanded is less
than percent change in price
If price decreases Total revenues decrease

=1 (unit – elastic) Percentage change in If price increases Total revenues are

quantity demanded is equal constant
to percent change in price
If price decreases Total revenues are
constant
>1 (elastic) Percentage change in If price increases Total revenues decrease
quantity demanded is greater
than percent change in price
If price decreases Total revenues increase
• Availability of Close Substitutes
• Importance of the Good to the Consumer
• Proportion of Income Spent on the Good
Supply
Supply refers to the various quantities of a good that a
seller is willing and able to sell at all possible
alternative prices over a given period of time, all other
things remaining constant.

Supply Function
- the relationship between the price of the good and
the various quantities that a seller is willing and able to
sell
Supply Function
Qsx = f (Px)
where: Qs = quantity supplied of good x
Px = price of good x
Supply Schedule and Supply Curve

Supply Schedule is a tabular depiction of the

relationship between price and quantity supplied.

Supply Curve is a graphical representation of

the supply schedule.
Supply Schedule and Supply Curve
Price Elasticity of Supply
- measures the responsiveness or sensitivity of
producers to changes in the price of a good.
- refers to the degree to which the quantity
supplied responds to changes in price
Price Elasticity of Supply

= Percentage change in quantity supplied

Percentage change in price
ES = QS / Q
P/ P
where: QS = new quantity supplied – old quantity supplied
Q = new quantity supplied + old quantity supplied
2
Price Elasticity of Supply

P = new price – old price

P = new price + old price
2
Types of Supply Elasticity
• Elastic Supply
• Inelastic Supply
• Unit – elastic Supply
• Perfectly Elastic Demand and Perfectly
Inelastic Supply
Factors affecting Price
Elasticity of Supply

• Availability of resources
• Time
Business Ethics
Ethics - refers to the principles and standards of moral
behavior that are accepted by society as right versus
wrong.
- a set of principles of right conduct
- theory or a system of moral values
Business ethics is the application of moral standards to
business situations.
Morality - the standards that an individual or a group
has about what is right and wrong, or good and evil
Ethics and the Law
Ethical and legal: Legal and ethical actions are both
acceptable within the legal framework and societal
norms
Unethical and legal: is when the law supports what
you are doing but it is unethical because the
society frowns at it
Ethics and the Law

Ethical but illegal: (e.g. publishing stolen but

revealing documents about government
mismanagement). The law frowns at it but the
society does not.
Unethical and illegal: Unethical and illegal actions
would imply making offerings that have been
outlawed and are against societal norms
Laws and regulations exist to achieve the following:
• Protect consumers
• Regulate competition
• Protect organizations from each other
• Protect the society
 Significance of Business Ethics

• Consumers are, arguably, more likely to buy from a

company which can be seen to be acting ethically.
• Graduates are more likely to be attracted to
companies which treat their employees fairly and give
customers a fair deal.
• Ethical business practice is a means of forestalling
legislation and stringent government regulations.
 Significance of Business Ethics

• Business ethics requires companies doing their bit to

contribute towards a just and fair society, while also
ensuring that environmental pollution is brought
under control.
• Another significance of business ethics stems from
the fact that businesses need to retain the vast
amount of social power entrusted to them by the
public.
The extent of ethical behavior of businesses is
influenced by the following factors:
• Cultural differences
• Knowledge
• Organizational behavior
 Concept of Ethical Conduct
Having known the meaning and importance of business
ethics, we can see that wanting to be an ethical corporate
citizen is not enough; individuals in business must actively
practice ethical conduct. In business, besides obeying laws
and regulations, a good and ethical conduct involves the
following:
• Competing fairly and honestly
• Communicating truthfully
• Not causing harm to others
The Workplace: Basic Issues

• Hiring
• Promotions
• Discipline and discharge
• Wages
• Unions
The Workplace: Today's Challenges

• Privacy
• Working Conditions
• Job Satisfaction & Redesigning Work
 Moral Choices Facing Employees
Obligations to the firm
• Loyalty to the company
• Conflicts of interest
Abuse of official position
• Insider trading
• Proprietary data
 Bribes and kickbacks
 Gifts and entertainment