By Flavio Alves 13I Supply and Demand
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By Flavio Alves 13I
Supply and Demand
When businesses are considering the price of their products and services, they will sometimes go and look at Supply and Demand.
Supply looks at the price setting point, from the view of the business.
Demand looks at the same process, but from the consumer/customer’s views.
Supply and Demand
What is it?Definition – Supply is the amount of goods
that producers are willing to supply or sell at a given price.
Supply
What is it?Definition – Demand is an amount that an
individual or individuals are willing to buy at a given price.
Demand
What is it?Equilibrium is when the Demand and Supply
are equal.
Equilibrium
0 10 20 30 40 50 60 70 800
0.5
1
1.5
2
2.5
3
3.5
4
90
Supply Curve
This is a Supply Curve
Price ($)
Quantity Supplied
Supply Curve
0 10 20 30 40 50 60 70 800
0.51
1.52
2.53
3.54
90
Now, by what you see here, the quantity that is being supplied is raising, therefore meaning that the price is also raising, because the demand is increasing. Price
($)
Quantity Supplied
Supply Curve (Example)
0 10 20 30 40 50 60 70 800
0.51
1.52
2.53
3.54
90
Price ($)
Quantity Supplied
Here’s an example. A farmer has gone to the market to sell the apples he picked from his apple tree.
Because demand for
the farmer’s apples
were increasing,
The farmer decided
to increase the price
for his apples, which
means that he will
gain more profit.
Supply Curve (Example)
0 10 20 30 40 50 60 70 800
0.51
1.52
2.53
3.54
90
Quantity Supplied
Price ($)
-----------------
Now, for every 9 apples that were sold approximately, the prices of the apples were 50 cents. Because the farmer realised how the demand was increasing, he decided to raise the price for the apples. Below are the results for how many apples were supplied at what prices.
It shows the demand
increasing, which is
what made the farmer
increase the apple price,
because he wanted to
make the most profit
possible.
Demand Curve
0 10 20 30 40 50 60 70 800
0.5
1
1.5
2
2.5
3
3.5
4
90
This is a Demand Curve
Price ($)
Quantity Supplied
Demand Curve
0 10 20 30 40 50 60 70 800
0.51
1.52
2.53
3.54
90
Price ($)
Quantity Demanded
Now, by what you see here, the quantity that is being demanded is increasing because the price is decreasing. This is because if the price is lower, then more people will want to purchase the product.
Demand Curve (Example)
0 10 20 30 40 50 60 70 800
0.51
1.52
2.53
3.54
90
Price ($)
Quantity Demanded
Here’s an example. In a primary school, they are selling Mars Bars at the canteen for $4. Because the price is so high, only approximately 4 people would buy them. Whereas if the price was lowered to 50 cents per Mars Bar, approximately 90 people would buy them.
Because the demand
for Mars Bars were low
at the price of $4, then
the school had no
choice but to lower the
price of them, which
would then increase
the demand.
Equilibrium
0 10 20 30 40 50 60 70 800
0.51
1.52
2.53
3.54
90
Price ($)
Quantity Demanded
Equilibrium is when both Supply and Demand curves intersect. The equilibrium is in the middle, which is the amount that the sellers and/or buyers are happy to pay/sell for the selected products.
Therefore, in this case
the amount demanded
at the price of approx.
$2.20, would be
approximately 48,
because this is the
equilibrium point.
Equilibrium
Lack of Raw MaterialsInput PriceCommunicationSub-ProductsTaxes and SubsidiesSeasonality of Material
Factors that affect Supply
Seasonality of ProductsDisposable IncomeState of EconomyCompetitorsDemographicPriceComplimentary Product
Factors that affect Demand
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