Transcript
DEMAND AND SUPPLY CURVE
OnKellogg's Cornflakes’
DEMAND
“Demand refers to the quantities of a commodity that the consumers are able and willing to buy at each possible price during a given period of time, other things being equal.”
For e.g., A consumer demands 2kg of sugar in a month at the price of Rs. 20 per kg. This is a complete example of demand for a commodity as it has all the three components of demand- quantity, price and time.
MAIN FEATURES OF DEMAND
Main features of demand for a commodity are:-
1. Demand is always with reference to a specific price.2. Demand is a flow of quantities bought in a given period of time.3. Consumer should have a desire and necessary purchasing power to buy the commodity.4.Consumer should be willing to pay for the commodity.
DEMAND FUNCTIONThe Demand function may be expressed
symbolically as
Q=f (P, Pr ,Y,T,E,O)
Where ‘Q’ stands for the quantity demanded of
the Commodity, ‘P’ for the price of the commodity,
‘Pr’ for prices of related goods, ‘Y’ for income of
the consumer, ‘T’ for tastes and preferences of the
consumer, ‘E’ for the expectations for the future
prices and ‘O’ stands for the other factors
DEMAND FUNCTION OF CORNFLAKES’
So the Demand of Kellogg's cornflakes’ that includes
• Price of the product• Substitutes-local brands with less cost
• Income of the consumer• Tastes and preferencesAnd so many other factors
-The Demand function of Kellogg's is given by: Q=f(Price of cornflakes’, local brands, income, tastes and preference and other factors-flavour likes honey, wheat)
LAW OF DEMAND
The law of demand explains the relationship between two
variables- price of the commodity and the quantity of the
commodity demanded, other things being constant
Symbolically,
Dx = f(Px)
Where Dx = demand of x commodity
Px = price of x commodity
DEMAND SCHEDULE- KELLOGG’S CORNFLAKES
The numerical tabulation of the law of demand is called the demand schedule.Following table shows a hypothetical demand schedule for Kellogg’s Cornflakes’
Price(Rs per Kg) Quantity Demanded( Kg per
Month
30 4
40 3
50 2
60 (current price) 1
The demand schedule shows an inverse relationship between price and
the quantity demanded. The consumer is willing to pay 60 rupees per kg
to buy 1 kg of cornflakes each month. If the price reduces by 30 rupees ,
he/she would be willing to buy an additional one or two kg per month
and so on. This implies that lower the price more will be the demand
and vice versa.
Demand Curve
The graphical representation of the demand schedule is called a
demand curve. The Demand curve for Kellogg’s cornflakes is drawn
which shows different quantities of cornflakes demanded at different
prices in a month
Diagrammatic representation
• A downward sloping or negatively sloped demand curve relates quantity demanded to price.
SUPPLY
According to Prof. Thomas, “The supply of goods is the quantity
offered for sale in a given market at a given time at various
prices.”
Thus the supply is defined as the total quantity of a commodity
that a seller is willing to produce and sell at a given price, during
a given period.
Typically involves the terms on which businesses produce and sell
their products.
SUPPLY FUNCTIONSupply of a commodity is determined by various
factors. Supply function is a functional relationship
between quantity supplied of a commodity and
factors affecting it. Supply function can be written as
Sx =f (Px,Pr,T,F,Gp)
Where Sx= Supply of commodity X, f=function of, Px
=price of commodity X, Pr= Price of related
commodity, T= technology, F=prices of factor inputs
Gp =Government policy
SUPPLY FUNCTION OF CORNFLAKES’
So the supply of Kellogg's cornflakes that includes
•Price of the commodity•Technology they are using
•Price of related commoditiesand
•Government policies- Taxes
•So the supply of Kellogg’s cornflakes’ is given by S=f(Price, Price of other Substitutes, Technology, Govt policies)
LAW OF SUPPLY
As the price of a good increases, suppliers will attempt to maximize profits by increasing the quantity of the product sold. Or
All other factors being equal, as the price of a good or service increases, the quantity of goods or services offered by suppliers increases and vice versa.
SUPPLY SCHEDULE- KELLOGG’S CORNFLAKES’
The numerical tabulation of the law of supply is called the supply schedule.Following table shows a hypothetical supply schedule for Kellogg’s Cornflakes’
Price (Rs per Box) Quantity supplied(Boxes per
year)
60 40
50 30
40 20
30 10
The supply schedule for cornflakes shows that at a price of
cornflake box of 30, only 10 boxes will be produced in an year. At
such a low price, breakfast manufacturers might want to devote
their factories to producing other types of cereal, like bran flakes,
that earn them more profit than cornflakes. So , as the price of
cornflakes increases, even more cornflakes will be produced .
Supply curve
The graphical representation of the Supply schedule is called a
Supply curve. The Supply curve for Kellogg’s cornflakes is drawn
which shows different quantities of cornflakes supplied at
different prices.
Diagrammatic representation
• Supply curve or Supply schedule relates quantity Supplied to Price
By AN IL KUMAR.K
Prepared
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