SUPPLY AND DEMAND.pptxbnjjjjjbbbbbbbbbbbbb

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1. SUPPLY AND DEMAND W.VIJAY JEBARSON MBA – 1 st YEAR

2. CONTENTS WHAT IS DEMAND? LAWS OF DEMAND WHY DOES DEMAND CURVE SLOPE DOWNWARDS? ELASTICITY OF DEMAND WHAT IS SUPPLY? LAWS OF SUPPLY WHY DOES SUPPLY CURVE SLOPE UPWARDS TO THE RIGHT? ELASTICITY OF SUPPLY EQUILIBRIUM ANALYSIS

3. WHAt is DEMAND? The demand refers to a consumer's willingness to buy certain quantity of goods and services and at the same time having ability to pay for same at various prices dealing within a period of time. Effective demand involves three things: 1) Desire 2) Means to purchase, 3) Willingness to use those means for that purchase.

4. LAWS OF DEMAND It explains the inverse relationship between the change in quantity demanded of the commodity and the change in the price of the commodity. If PRICE will be HIGH then QUANTITY DEMANDED OF THE COMMODITY will become LESS If PRICE gets DOWN then the QUANTITY DEMANDED OF THE COMMODITY increases

5. WHY DOES DEMAND CURVE SLOPE DOWNWARDS? The inverse relationship between quantity demanded and price of a commodity is shown by the downward slope of the demand curve. Following are the reasons for the downward of the demand curve: 1) Income Effect : The purchasing power of the consumer increases when the price of the commodity decreases. Thus demand for that commodity increases. 2) Substitution Effect: When the price of any commodity decreases then it becomes cheaper incomparison to other similar commodities. This condition influences the consumer to substitute thecommodity by the commodity whose price has decreased. 3) New Consumer Creating Demand: When price of any commodity decreases then various consumers start buying it who could not buy it previously due to its higher price. 4) Based on the Law of Diminishing Marginal Utility: According to this law, the marginal utility of a commodity continues to decline when a customer buys more units of that commodity,

6. 5) Price Effect: As one knows that each product has certain consumers, but when its price falls, new consumers start consuming it, as a result demand increases but on the other hand when the price of the product rises, many consumers will either reduce or stop its consumption and the demand will be reduced. Thus, price effect leads to slope the demand curve downward. 6) Different Income Groups: The different income groups are available in every society but the low income group is available in majority. This group influences the downward sloping demand curve. 7) Different Uses: There are various commodities and services those can be used for different purposes. These are responsible for the negative slope of the demand curve. 8) Tendency to Satisfy Unsatisfied Wants: A person wants to satisfy his demand when the price of any good decreases and hence, its demand increases. The demand curve slopes downwards to the right due to the human tendency

7. ELASTICITY OF DEMAND Price elasticity of demand is a measurement of the change in the demand for a product as a result of a change in its price . If a price change creates a large change in demand, that is known as elastic demand. If a price change creates a small change in demand, that is an inelastic demand.

8. WHAT IS SUPPLY? The total amount of a specific good or service that is available to consumers.

9. SUPPLY CHAIN A network between a company and its suppliers to produce and distribute a specific product to the final buyer ; it includes different activities, people, entities, information, and resources.

10. LAWS OF SUPPLY an increase in the price of goods or services results in an increase In their supply A decrease in the price of goods or services results in a decrease In their supply

11. WHY DOES SUPPLY CURVE SLOPE UPWARDS TO THE RIGHT? The increase in prices allows the producer to make further profits for the firm. When the other things remains constant, the direct relationship between price and quantity supplied leads to emergence of some situations. There are various causes for the upward sloping of the supply curve which are as follows: 1) Change in Stock: As there is positive relationship between supply and the price, therefore, with increase in price, the quantity supply of the old stock also increases and vice-versa. This result into the increase in inventory with the rise in prices. 2) Profit and Loss: with reduction in the prices the supply of the firm reduces and it results in losses for the firm and loss of confidence among the producer who makes the decision to produce smaller quantities. Hence, the cost of production is reduced considerably. 3) Entry and Exit of the Firms: In the situation of loss, the existing firms try to move out from the industry which leads to reduction in supply because the producer who are not efficient do not expect to eam any profit in the market at reduced prices. Hence, the supply curve slopes upward from left to right. 4) Incentive for Innovation: Nowadays, the scientific researcher uses modern technology for the production process which results into the positive effects.

12. The elasticity of supply, also known as the price elasticity of supply (PES), is a measure of how much the quantity of a good or service changes in response to a price change. It's calculated by dividing the percentage change in quantity supplied by the percentage change in price. ELASTICITY OF SUPPLY

13. EQUILIBRIUM ANALYSIS Equilibrium is the state in which market supply and demand balance each other, and as a result prices become stable. Generally, an over-supply of goods or services causes prices to go down, which results in higher demand—while an under-supply or shortage causes prices to go up resulting in less demand.