Economics

• Demand


  The quantity of goods and services that consumers are willing and able to buy at a given price and at a particular place and time
• Demand is quite different from wants, need or desire
• Effective demand


  A want backed by the ability to pay the price, meeting 3 conditions: ability to pay, willingness to pay, authority to buy
• Demand must be related to price because price determines the quantity consumers are willing to buy
• Law of demand


  The higher the price, the lower the quantity of goods demanded, or the lower the price, the higher the quantity of goods demanded
• Demand schedule


  A table of values showing the relationship between prices and quantity of a commodity demanded
• Types of demand schedule

  • Individual demand schedule
  • Market demand schedule
• Individual demand schedule


  Shows the different quantities of a commodity an individual will purchase at given prices
• Market demand schedule


  Shows the total quantities of a commodity all consumers are willing to buy at various prices
• Demand curve


  A graph showing the relationship between price and quantity of a commodity demanded
• The demand curve slopes downwards from left to right
• Complementary (joint) demand


  Demand for two or more goods together, e.g. car and petrol
• Competitive (substitute) demand


  Demand for two goods that are close substitutes, e.g. fish and meat
• Composite demand


  Demand for a single commodity that serves many useful purposes, e.g. cocoa beans
• Derived demand


  Demand for a commodity not for immediate consumption but for demand of another commodity, e.g. flour for bread
• Factors affecting demand


  • Price of the commodity
  • Price of other commodities
  • Income of the consumer
  • Change in taste and fashion
  • Period of festival
  • Size of the population
  • Weather
  • Expectation of future changes in price
  • Advertising
  • Availability of credit facilities
  • Introduction of new commodities
  • Taxation on commodities
• Supply


  The quantity of goods and services sellers are willing and able to offer for sale at a particular price and time
• Effective supply


  The amount of a commodity put into the market or offered for sale at a given price and time
• Law of supply


  The higher the price, the higher the quantity supplied, or the lower the price, the lower the quantity supplied
• Supply schedule


  A table showing the relationship between price and quantity of a commodity supplied
• Types of supply schedule

  • Individual supply schedule
  • Market supply schedule
• Supply curve


  A graph showing the relationship between price and quantity of a commodity supplied
• The supply curve slopes upwards from left to right
• Complementary (joint) supply


  Supply of two or more commodities from one source, e.g. petrol and kerosene from crude oil
• Competitive (substitute) supply


  Supply of two or more commodities that serve as substitutes, e.g. meat and fish
• Composite supply


  Supply of a commodity that can serve two or more purposes, e.g. flour for doughnuts and cake
• Factors influencing supply


  • Price of the commodity
  • Cost of production
  • Technological development
  • Season
  • Government policies
  • Expectation of future price changes
  • Taxation
  • Prices of other commodities
  • Number of producers
  • Natural disasters