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CHAPTER 2:
DEMAND AND SUPPLY ECO 162: MICROECONOMICS
1 CONVENTIONAL CLASSIFICATION OF THE GOODS
2 ISLAMIC CLASSIFICATION OF THE GOODS
3 DEMAND • Definition: Demand is desire and ability of the consumer to buy and purchased an item.
4 DEMAND • Demand is defined as the different quantities of goods or services which buyers are willing and able to buy at different possible prices in a given period of time, ceteris paribus. • Individual demand— this refers to the demand of goods and services from a single consumer. • Market demand— this is a horizontal summation of all the individual demand in a particular market. 5 CHANGE IN QUANTITY OF DEMAND AND CHANGE IN DEMAND
• State the alternative strategies.
• List advantages & disadvantages of each. • State cost of each option.
6 FACTORS THAT EFFECT CHANGE IN QUANTITY OF DEMAND • PRICE OF DEMAND 1. QUANTITY DEMAND DECREASE (CONTRACTION) 2. QUANTITY DEMAND INCREASE (EXPANSION)
7 FACTORS THAT EFFECT CHANGE IN DEMAND • EXAMPLES (DEMAND CURVE SHIFT FROM LEFT TO RIGHT) (EXPANSION)
1. PRICE OF RELATED GOODS
SUBSTITUTE GOODS
8 • COMPLEMENT GOODS
9 2. CONSUMER INCOME ↑ = QD ↑ 3. POPULATION ↑ = QD ↑ 4. ADVERTISEMENT ↑ = QD ↑ 5. FESTIVE SEASONS = QD ↑ 6. CONSUMER FASHION, TASTE AND PREFENCES = QD ↑ 7. EXPECTATION OF FUTURES = Examples: next day price of petrol increase from rm 2.00 to rm 2.50, Consumer will QD ↑ even the price of petrol not yet increase TODAY.
10 SUPPLY • Definition: Supply is desire and ability of the firm to sells an item.
11 SUPPLY • Supply is defined as the producer’s ability and willingness to supply different quantities of goods and services at different possible prices and time range.
• Individual supply—refers to the supply of goods and services from a single seller.
• Market supply curve—this
curve can be derived by horizontal summation of all individual supply curves
12 CHANGE IN QUANTITY OF SUPPLY AND CHANGE IN SUPPLY
13 FACTORS THAT EFFECT CHANGE IN QUANTITY OF SUPPLY • PRICE OF SUPPLY 1. QUANTITY SUPPLY DECREASE (CONTRACTION) 2. QUANTITY SUPPLY INCREASE (EXPANSION)
14 FACTORS THAT EFFECT CHANGE IN SUPPLY • EXAMPLES (SUPPLY CURVE SHIFT FROM LEFT TO RIGHT) (EXPANSION)
1. PRICE RELATED GOODS
SUBSTITUTES GOODS
15 COMPLEMENT GOODS
16 2. COST OF PRODUCTION ↓ = QS ↑ 3. TECHNOLOGICAL ADVANCE = QS ↑ 4. NUMBER OF SUPPLIER ↑ = QS ↑ 5. TAXES ↓, SUBSIDY ↑ = QS ↑ 6. EXPECTED OF FUTURES PRICE, Examples; expect that the price of I phone will decrease next day, supplier will increase selling of I Phone today.
