Textile and Apparel

Management
Lecture 2
Demand
• In order to be a demand
-There should be desire/willingness to buy
-There should by buying power/purchasing power to buy
Law of Demand
• Law of Demand:
-In microeconomics, the law of demand is a fundamental principle which states
that, "conditional on all else being equal, as the price of a good increases (↑),
quantity demanded will decrease (↓); conversely, as the price of a good
decreases (↓), quantity demanded will increase (↑)".[1] The only factor which
influences the quantity demanded is the price. The law of demand is the inverse
relationship between demand and price. [2] It also “works with the law of supply to
explain how market economies allocate resources and determine the prices of
goods and services that we observe in everyday transactions” [3] The law of demand
describes an inverse relationship between price and quantity demanded of a good.
Alternatively, other things being constant, quantity demanded of a commodity is
inversely related to the price of the commodity. For example, a consumer may
demand 2 kgs of apples at $70 per kg; he may, however, demand 1 kg if the price
rises to $80 per kg. This has been the general human behaviour on relationship
between the price of the commodity and the quantity demanded. The factors held
constant refer to other determinants of demand, such as the prices of other goods
and the consumer's income.[4] There are, however, some possible exceptions to the
law of demand, such as Giffen goods and Veblen goods.
Determinants of Demand
Curve
• 1. The average income of consumers
• 2. The size of market
• 3. The prices and availability of related goods
• 4. Special influences (climate, weather)
• 5. Tastes and Preferences
Exceptions to the Demand
Curve
• Veblen goods
• Price change exception
• Necessary goods
• Luxury goods
• Income change (personal or family income)
Supply
• The amount of goods or commodities which a seller agrees or
make available in the market is called supply
Law of Supply
• The law of supply is a fundamental principle of economic
theory which states that, keeping other factors constant, an
increase in price results in an increase in quantity supplied.[1]
In other words, there is a direct relationship between price
and quantity: quantities respond in the same direction as price
changes. This means that producers are willing to offer more
of a product for sale on the market at higher prices by
increasing production as a way of increasing profits.[2]
• In short, the law of supply is a positive relationship between
quantity supplied and price and is the reason for the upward
slope of the supply curve.