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Demand. Desire, ability and willingness to buy a product. Demand Schedule. List that shows the quantity demanded at all prices that prevail in the market at any given time. Demand Curve. Graphic representation of demand schedule. Law of Demand. Relationship of demand and price

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Presentation Transcript
Demand
Demand

  • Desire, ability and willingness to buy a product


Demand schedule
Demand Schedule

  • List that shows the quantity demanded at all prices that prevail in the market at any given time


Demand curve
Demand Curve

  • Graphic representation of demand schedule


Law of demand
Law of Demand

  • Relationship of demand and price

  • Varies inversely


Changes in demand
Changes in Demand

  • Tastes

  • Price of related good

  • Expectation of future prices

  • Number of buyers in the market


Demand elasticity
Demand Elasticity

  • Indicates the extent to which changes in price cause changes in quantity demanded.


Elastic vs inelastic

Small change in price causes a relatively large change in the quantity of demand.

Change in price causes a relatively smaller change in quantity demanded.

Elastic vs. Inelastic


Determinants of demand elasticity
Determinants of Demand Elasticity the quantity of demand.

  • Can the purchase be delayed?

  • Are adequate substitutes available?

  • Does the purchase use a large portion of income?


Supply
Supply the quantity of demand.

  • A schedule of quantities that people will sell at different prices


Supply schedule
Supply Schedule the quantity of demand.

  • The quantity offer at each and every possible market price


Supply curve
Supply Curve the quantity of demand.

  • Graphic representation of supply schedule


Law of supply
Law of Supply the quantity of demand.

  • The quantity supplied, or offered for sale, varies directly with its price


Changes in supply
Changes in Supply the quantity of demand.

  • Change in supply of inputs

  • Productivity of workers

  • Technology

  • Number of sellers

  • Taxes, fees, subsidies

  • Expectations

  • Government regulation


Equilibrium
Equilibrium the quantity of demand.

  • Supply equals demand

  • No shortage

  • No surplus


Aggregate demand
Aggregate Demand the quantity of demand.

  • The total value of real GDP that all sectors of the economy are willing to purchase at various price levels


Aggregate demand1
Aggregate Demand the quantity of demand.

  • Real Balance Effect

    • Buy more as price declines

  • Interest Rate Effect

    • Rise or fall in rates

  • Foreign Purchase Effect

    • Effect on net exports


Aggregate supply
Aggregate Supply the quantity of demand.

  • The amount of real output or real GDP, that will be made available by sellers at various price levels.


Long run aggregate supply curve
Long-Run Aggregate Supply Curve the quantity of demand.

  • Full Employment 5%

  • Output is independent of prices


Short run aggregate supply curve
Short-Run Aggregate Supply Curve the quantity of demand.

  • Economy operates below full employment GDP in short run

  • Shape- Business firms will supply increasing amounts of output as prices rise.

  • Can operate beyond full employment GDP in short run


Say s law
Say’s Law the quantity of demand.

  • Jean Baptiste Say

  • Supply creates its own demand


Keynes
Keynes the quantity of demand.

  • Below full employment

  • Full employment

  • Above full employment


Disequilibrium
Disequilibrium the quantity of demand.

  • Aggregate demand exceeds aggregate supply

    • Inventories decline

    • Business order more inventory

    • Increase land, labor, capital


Disequilibrium1
Disequilibrium the quantity of demand.

  • Aggregate supply exceeds aggregate demand

    • Inventories rise

    • Retailers order less from manufacturers

    • Manufacturers produce less


Keynesian fix for disequalibrium
Keynesian Fix for the quantity of demand.Disequalibrium

  • I volatile

  • G steps in and spends money


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