DEMAND AND SUPPLY The analysis of demand and supply is an ...€¦ · DEMAND AND SUPPLY The...
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DEMAND AND SUPPLY The analysis of demand and supply is an economic tool used to examine and predict the behaviour of households (purchasers of goods and services) and business (the suppliers of the goods and services) 1. DEMAND (households) “Demand” is the intention that households have to buy a product and they have the money to do so. Definition: Demand refers to the quantities of a good or service that the potential buyers are willing to buy and are able to buy during a certain period. 1.1. The following factors determine demand • The price of the product i.e. the lower the market price the more will be demanded • The price of related products e.g. bread, butter, jam and cheese • The income of the consumer • The taste (or preference) of the consumer • The size of the household Availability and supply does not influence demand. To illustrate market demand we make use of numbers in the form of a schedule (Demand schedule) and we make use of a graph (Demand curve). Example: The possible market demand (total demand) of microwaves at given prices for 2011. Price per microwave Quantity microwaves demanded at given price R 2 500 R 2 000 R 1 500 R 1 000 R 500 100 300 400 500 600 ACTIVITY 1 Using the data given in the demand schedule, draw a graph for market demand for 2011. Give your graph a heading. Price per kettle Quantity kettles demanded at given price R 350 R 300 R 250 R 100 R 50 100 150 200 250 300 Graph showing the possible demand of microwaves for 2011 QUANTITY PRICE 0 500 1000 1500 2000 2500 100 200 300 400 500 600 D D Schedule You will note that the higher the price, the lower the demand and the lower the price the higher the demand. Name: _____________________ 59 _______________________ NB. Use tools on Adobe Acrobat to draw your graph 0 __________________________ ________________________
Transcript of DEMAND AND SUPPLY The analysis of demand and supply is an ...€¦ · DEMAND AND SUPPLY The...
DEMAND AND SUPPLY
The analysis of demand and supply is an economic tool used to examine and predict the behaviour of households (purchasers of goods and services) and business (the suppliers of the goods and services)
1. DEMAND (households)
“Demand” is the intention that households have to buy a product and they have the money to do so.
Definition: Demand refers to the quantities of a good or service that the potential buyers are willing to buy and are able to buy during a certain period.
1.1. The following factors determine demand• The price of the product i.e. the lower the market price the more will be
demanded• The price of related products e.g. bread, butter, jam and cheese• The income of the consumer• The taste (or preference) of the consumer• The size of the household
Availability and supply does not influence demand.
To illustrate market demand we make use of numbers in the form of a schedule (Demand schedule) and we make use of a graph (Demand curve).
Example: The possible market demand (total demand) of microwaves at given prices for 2011.
Price per microwave
Quantitymicrowaves demandedat given price
R 2 500R 2 000R 1 500R 1 000R 500
100300400500600
ACTIVITY 1Using the data given in the demand schedule, draw a graph for market demand for 2011. Give your graph a heading.
Price per kettle
Quantitykettlesdemandedat given price
R 350R 300R 250R 100R 50
100150200250300
Graph showing the possible demand of microwaves for 2011
QUANTITY
PR
ICE
0
500
1000
1500
2000
2500
100 200 300 400 500 600
D
D
Schedule
You will note that the higher the price, the lower the demand and the lower the pricethe higher the demand.
Name: _____________________
59
____
____
____
____
____
___
NB. Use tools on Adobe Acrobat to draw your graph
0 __________________________
________________________
Price per tent
Quantitytents suppliedat given price
R 700R 600R 500R 300R 100
500450400200100
2. SUPPLY (Firms/ businesses)
“Supply” is the planned quantity of goods to be supplied by business, farmers etc.
Definition: Supply refers to the quantities of a good or service that producers plan to sell at each possible price during a certain period
2.1. The following factors determine supply• The price of the product e.g. the higher the market price the more a farmer will
supply• The prices of substitute products i.e. goods that can be used instead of the product
e.g. butter and margarine• Prices of Factors of Production and other inputs – higher input costs means higher
production costs and vice versa• Expected future prices e.g. a farmer may expect high prices on the market for his
tomatoes so he supplies more or a wheat farmer may withhold his supply till pricesincrease
• The state of technology e.g. use of new fertilizers may improve the farmers yield
Demand influences price and price influences supply
To illustrate market supply we make use of numbers in the form of a schedule (Supply schedule) and we make use of a graph (Supply curve)
Example: The possible market supply (total supply) of bicycles at given prices for 2011
ACTIVITY 2Using the data given in the supply schedule, draw a graph for market supply for 2011. Give your graph a heading.
Graph showing the possible supply of bicycles for 2011
QUANTITY
PR
ICE
0
1000
2500
3500
4000
5000
1000 2000 3000 4000
S
S
Price per bicycle
Quantitybicycles suppliedat given price
R 5 000R 4 000R 3 500R 2 500R 1 000
4000300025001000500
Schedule
You will note that the higher the price the higher the supply and the lower the price the lower the supply.
Name: _____________________
60
____
____
____
____
____
___NB. Use
tools on Adobe Acrobat to draw your graph
________________________
__________________________
