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THE CONCEPT OF DEMAND AND SUPPLY

Demand Is the willingness and ability of consumer to buy commodity at a given price and specified period of time OR
Demand is the quantity of goods or service that a buyer is willing and able to buy at different prices.
Quantity demanded is the amount of goods a buyer is willing and able to buy at a given price and at a particular time
Demand schedule is a chart or table showing the relationship between quantity demanded and its prices.
Individual demand schedule is the table or chart which shows the relationship of the quantity demanded and prices for one person.
Market demand schedule is the table which shows the relationship between quantity demanded and prices for many persons.
Price (Tshs)
Quantity demanded (Kgs)
300
250
200
150
100
100
150
200
250
300
Demand curve is a graphically representation of demand schedule OR
Demand curve is the graph showing the quantity of a commodity demanded at different prices.
From the demand schedule below draw demand curve.
Price (Tshs)
Quantity demand (Kgs)
2
60
4
50
6
40
8
30
10
20
12
10
Demand Curve
Demand curve (dd) slopes downwards from left to right because as price decreases quantity demanded increase.

Example of market demand schedule
Price (Tshs)
Quantity demanded by A
Quantity demanded by B
MARKET
100
50
60
40
20
50
60
70
80
90
0
10
20
30
40
50
70
90
110
130
NOTE: (A+ B)=MARKET
TYPES OF DEMAND
There are four types of demand these are;
i/Composite demand
ii/Derived demand
iii/Joint or complimentary demand
iv/Competitive demand

1)COMPOSITE DEMAND
Is a commodity that can meet or can be demanded to satisfy more than one need.
examples
i)steel;can be used to manufacture ship,motor car, machine, knives e.t.c
ii)Water;can be used for
-drinking
-cleaning
-washing
2/DERIVED DEMAND
These are the goods which are demanded for the aim of producing another goods (final goods).
The nature of commodities which have derived demand are inputs such as;
i/Raw material (cotton, sisal)
ii/Fertilizer
iii/Machine
-Fertilizer is demanded in order to produce cotton.maize,beans
-Cotton is demanded in order to produce cloth.

3/JOINT OR COMPLIMENTARY DEMAND
Refers to the commodities which are demanded or consumed together.
Those commodities which can not be separated in their uses.
Example: i/Sugar and tea leaves
ii/Bread and Blue band
iii/Cars and fuel
The above commodities are demanded together.

4/COMPETITIVE DEMAND
These are commodities which are close substitute and have the same utility or satisfaction
If price of one commodity rises, it makes a rise in quantity demanded for another commodity.
Example:
i/Meat vs fish
ii/Coffee vs Tea leaves
iii/ Pepsi vs Coca-cola

THE LAW OF DEMAND
The law of demand states that; The higher the price the lower the quantity demanded and the lower the price the higher the quantity demanded.

Commodity will decrease and when the price is lower the quantity demanded of commodity will increase.
This means, demand have inverse relation with price.
(i) when Px↓→Qd
Px↑→Qd
where;
P= Price of the commodity
Qd= Quantity demanded of commodity

FACTORS AFFECTING DEMAND
Decrease in demand
This occurs when the income or taste of consumer or population size falls. It is shown with the shift of demand curve to the left of the original demand curve.



NOTE:
1. DoDo– Shows the original demand curve
2. D1D1– Shows the change in demand from DoDo to D1D1
3. Price (Po)- is constant (No change in price)
4. Demand decrease from Qo to Q1. This occurs when the income, taste, fashion, and population size of the consumers increase or improves. It is shown with the shift of demand curve from the original to the right hand side of the original curve.

Increase in demand
This occurs when the income or taste of consumer or population size rises. It is shown with the shift of demand curve to the right of the original demand curve.


NOTE:
1. DoDo– Shows the original demand curve
2. D1D1– Shows the change in demand from DoDo to D1D1
3. Price (Po)- is constant (No change in price)
4. Demand increase from Qo to Q1

Price (Tsh)
Quantity (kgs)
1
20
5
10

Price (Tshs)
Quantity supply (Kgs)
1
3
2
7
3
11
4
14
5
16

Price (Tshs) Quantity
Demand (Kgs)
Supply (Kgs)
60

200
1,400
50
400
1,200
40
600
1,000
30
100
100
20
1,000
600
10
1,200
400


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1 Comment

  • Mary, May 21, 2023 @ 4:57 pm Reply

    Thanks for thegood notes

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