POE SLIDES UNIT 3
Principles of Economics - Chapter 3: Theory of Demand and Theory of Supply
Page 2: Definition of Demand
Demand: Ability and willingness to buy specific quantities of goods at a particular price within a given time frame, ceteris paribus.
Page 3: Classification of Goods and Services
Free Goods: No production cost.
Public Goods: Common use, benefits everyone.
Economic Goods: Tangible goods of value.
Economic Services: Intangible goods of value.
Page 4: Law of Demand
Law of Demand: Inverse relationship between price and quantity demanded.
Higher price (P ↑) leads to lower quantity demanded (Qdd ↓).
Lower price (P ↓) leads to higher quantity demanded (Qdd ↑).
Page 5: Demand Schedule and Curve
Demand Schedule: Table showing price and quantity demanded.
Demand Curve: Graphical representation of the demand schedule.
Page 6: Individual and Market Demand
Individual Demand: Quantity demanded by a single individual at various prices.
Market Demand: Total quantity demanded by all consumers in the market at various prices.
Page 7: Determinants of Demand
Factors influencing demand:
Price of related goods
Consumers’ income
Tastes and trends
Population or number of buyers
Supply of money in circulation
Expectations about future prices
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Page 8: Changes in Quantity Demanded vs. Changes in Demand
Changes in Quantity Demanded:
Movement along the demand curve due to price changes.
Contraction (decrease) and Expansion (increase) in quantity demanded.
Changes in Demand:
Shift in the demand curve due to changes in other factors while price remains constant.
Page 9: Exceptional Demand
Giffen Goods: Demand increases as price increases, contrary to the Law of Demand.
Other examples include status symbol goods, speculation, emergencies, and highly-priced goods.
Page 10: Inter-Related Demand
Cross Demand: Demand affected by the price of substitutes or complementary goods.
Joint Demand: Demand for goods that are used together.
Competitive Demand: Demand for substitute goods.
Page 11: Cross Demand: Joint Demand vs. Competitive Demand
Joint Demand: Negative relationship between complementary goods.
Competitive Demand: Positive relationship between substitute goods.
Page 12: Derived Demand
Demand for a good derived from the demand for another good.
Page 13: Interrelated Demand - Composite Demand
Composite Demand: Demand for a good with multiple uses (e.g., oil for petrol, kerosene, diesel).
Page 15: Definition of Supply
eduSupply: Ability and willingness to sell or produce a product at a particular price within a given time frame, ceteris paribus.
Page 16: Law of Supply
Law of Supply: Direct relationship between price and quantity supplied.
Higher price (P ↑) leads to greater quantity supplied (Qss ↑).
Lower price (P ↓) leads to lower quantity supplied (Qss ↓).
Page 17: Supply Schedule and Curve
he market at various prices.
Supply Schedule: Table showing price and quantity supplied.
Supply Curve: Graphical representation of the supply schle.
Page 18: Individual and Market Supply
Individual Supply: Quantity supplied by a single seller at various prices.
Market Supply: Total quantity supplied by all sellers in t
Page 19: Determinants of Supply
Factors influencing supply:
Price of related goods
Number of sellers
Improvement in infrastructure
Government policies
Proportion of expenditure on a product
Expected future price
Technological advancement
Cost of production
Page 20: Change in Quantity Supplied vs. Change in Supply
Change in Quantity Supplied:
Movement along the supply curve due to price changes.
Contraction (decrease) and Expansion (increase) in quantity supplied.
Change in Supply:
Shift in the supply curve due to changes in other factors while price remains constant.
Page 21: Exceptional Supply
Exceptional Supply: Opposite of the Law of Supply; as price increases, quantity supplied decreases.
Page 22: Interrelated Supply - Joint Supply
Joint Supply: Increase in the supply of one good leads to an increase in the supply of another related good.