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Demand PDF

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11 views6 pages

Demand PDF

Uploaded by

tyliqueantoine
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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SUBJECT: PRINCIPLES OF BUSINESS

Topic: Demand and Supply


OBJECTIVES

Students should be able to;


• Define demand
• Explain the determinants of demand
• Define and illustrate the demand schedule and demand curves
• Illustrate a movement along the demand curve and explain its causes
• Illustrate shifts in the demand curve and explain the causes
DEMAND
• Demand: the desire, willingness and ability of consumers to purchase goods and services at
a particular price and a particular period of time.
• Demand schedules: show the quantities of a particular product that the consumer will
buy at various prices.

Price ($) Quantity demanded


10 20
8 50
7 66
6 82
5 100

• The law of demand: as prices increases, quantity demanded decreases and as price
decreases, quantity demanded increases. N.B. There is a inverse relationship between price
and quantity demanded.
FACTORS AFFECTING DEMAND:
Factors affecting demand
1. Price; when price decreases quantity demanded rises, which causes an expansion in quantity demanded and
when price increases quantity demanded drops, which causes a contraction in quantity demanded. This is
shown by a movement along the demand curve.
2. Taste and fashion; when items are in style, consumers are more willing to pay higher prices for the same
quantity. This results in a rightward shift of the demand curve.
3. Income: when consumers’ buying power increases, so too does their willingness and ability to buy more, this
results in a shift to the right of the demand curve.
4. Climate/weather conditions: as the weather changes, consumers are induced to change their spending
patterns, e.g. in the rainy season consumers are more willing to purchase umbrellas even though the price has
not changed. This means that demand increases.
5. Changes in the price of substitutes and compliments: if the price of a good falls and the demand for
another increases, then one good is a compliment to the other (e.g. bread and butter). On the other hand,
when the price of a good falls resulting in a fall in demand for another good, then the goods are substitutes.
6. Expectations: if consumers anticipate a price increase, then they will attempt to take advantage of that
knowledge by increasing their demand for that good now, demand will increase causing the curve to shift to
the right and vice versa.
7. Advertising: successful advertising campaign means that consumers are willing to purchase more of a good
at a given price, resulting in a rightward shift of the demand curve. An unsuccessful campaign will have no
effect on demand.
CHANGES IN THE DEMAND CURVE
There are two (2) types of changes involved in demand.
A movement along the demanded curve ( as a result of a change in the price):
this causes an upward or downward movement along the existing demand curve.
CHANGES IN THE DEMAND CURVE
A shift in the demand curve (as a result of all other factors EXCEPT price)

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