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Demand
1. Willingness
2. Ability.
Individual demand can be defined as either willingness and ability of a consumer to
purchase a product or the quantity of a product that an individual purchases at a given
price. Ie bens demand for pizza at $4.95 is one pizza a week.
Law of Demand.
“As the price of a good/service decreases, the quantity demanded increases”, and vice
versa.
Shifts of the Demand Curve:
To the right: Increase in demand
To the left: decrease in demand
Shifts can be caused by:
 Tastes/Fashion
 Income
 Price of complements
 Price of substitutes
 Advertising
 Weather
Movements Along The Demand Curve
Caused by changes in price.
A shift left along the demand curve indicates a increase in price which caused a decrease
in quantity demanded.
A shift right along the demand curve indicates a decrease in price which caused a
increase in quantity demanded.
NB Because movements are caused by price any change is that of QUANTITY
demanded.
Market Equilibrium
The price at which quantity demanded equal quantity supplied. No Shortage or Surplus.
The market always tends towards this situation.
Supply:
The amount of a good/service that a producer is willing and able to produce at each and
every price.
Market Supply
The horizontal summation of all individual supply curves.
Movements Along the Supply Curve:
Only by a change in price of the good/service in question.
Shift left- caused by an increase in price which leads to a increase in quantity supplied.
Shift right- caused by an decrease in price which leads to a decrease in quantity supplied.
Law of Supply:
“an increase in the price will lead to an increase in the quantity supplied”
Shifts of the Supply Curve:
1.
2.
3.
4.
5.
6.
change in the price of related goods. E.g. strawberries and raspberries
Change in cost of production (EF)
Change in level of technology (EF)
Change in indirect taxes e.g. GST
Subsidies to firms by government
Tariffs
Economic Factors (EF) are those in which the firm has control over.
Shift Right- Increase in supply
Shift Left- Decrease in supply