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DEMAND AND SUPPLY
By : Siti Noorbiah Md Rejab
Demand
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Demand can be defined as the willingness
and ability to purchase a product at a certain
price level in a given time period.
Demand schedule = shows the specific
quantity of a good or service that people are
willing and able to buy at different prices
Demand curve = A curve that shows the
relationship between price (P) and quantity
demanded (Qd)
Law of Demand
 The
principle that there is an
inverse relationship between the
price of a good and the quantity
buyers are willing to purchase in a
defined time period, ceteris paribus
 Shown by the downward sloping
demand curve
Demand Curve
P
P2
P0
P1
D
Q
Q2
Q0
Q1
Change in Qd vs. Change in D
A Change in Quantity Demanded
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For any product a change in quantity
demanded is always caused by a change in
the product’s price
Movement along a stationary demand curve
P
P2
P1
0
Q2
Q1
D
Q
A Change in Demand
When any of the nonprice determinants
of demand changes, the demand curve
responds by shifting
 Shown by a shift of the demand curve
either to the right or to the left

P
P
D2
D3 D1
Q
Q3
Q1
Q2
Supply
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Supply refers to the quantity of a good that
sellers are willing and able to offer for sale in a
given time period.
Law of supply – The principle that there is a
direct relationship between the price of a good
and the quantity sellers are willing to offer for
sale in a defined time period, ceteris paribus.
It is illustrated by the upward sloping supply
curve
Supply Curve
P
S
15
10
5
0
2
4
6
Q
Change in Qs vs. Change in S
A Change in Quantity Supplied
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A change in quantity supplied is a
movement along a stationary supply curve
caused by a change in price.
Illustrated by a movement along a
stationary supply curve.
P
S
P2
P1
Q1
Q2
Q
A Change in Supply
When any of the nonprice determinates
of supply changes, the supply curve
responds by shifting
 Shown by a shift of the supply curve
either to the right or to the left

P
S3
S1
S2
P0
0
Q
Q3
Q1
Q2
Conclusion
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Price plays important role in determining
quantity demanded and supplied.
However changes in other factors such as
incomes, population, tastes, price of other
goods will affect the quantity of goods
demanded.
Changes in factors like cost of production,
technology, seasonal factors will affect the
quantity of goods supplied.