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What is Demand?
An economic principle that describes a consumers desire and willingness to pay a price for a specific good or service. Holding all other factors constant, the price of a good or service increases as its demand increases and vice versa. Definition of Demand: The demand for a product refers to the amount of it which will be bought per unit of time at a particular price.

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Determinant of Demand
Price of the products Income Tastes, Habits, Preferences Relative price of other goods-substitutes and complementary goods Consumers Expectations Advertisement Effect

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Law of Demand
The law of demand expresses the nature of functional relational relationship between two variables of the demand relation viz ; the price and the quantity demanded. It simply states that demand varies inversely to change in price.

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Shifts v/s Movement

Movements:
A movement refers to a change along a curve. On the demand curve, a movement denotes a change in both price and quantity demanded from one point to another on the curve.

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Therefore, a movement along the demand curve will occur when the price of the good changes and the quantity demanded changes in accordance to the original demand relationship.

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 Shifts

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A shift in a demand or supply curve occurs when a good's quantity demanded or supplied changes even though price remains the same. Shifts in the demand curve imply that the original demand relationship has changed, meaning that quantity demand is affected by a factor other than price.

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Elasticity Of Demand

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Definition
The degree to which demand for a good or service changes with its price. Normally, sales increase with drop in prices and decrease with rise in prices. For e.g. necessities goods such as food medicines etc have low price elasticity i.e. the demand does not vary much due to change in price, Whereas demand for goods such as cars, appliances etc have higher price elasticity i.e. their demand responds to the change in price.

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DEGREES OF ELASTICITY

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Perfectly Elastic Demand:

A demand is perfectly elastic when a small increase in the price of a good highly affects the demand of the product.

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Perfectly Inelastic Demand:

When the quantity demanded of a good dose not change at all to whatever change in price, the demand is said to be perfectly inelastic or the elasticity of demand is zero.

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Unitary Elasticity of Demand:

When the quantity demanded of a good changes by exactly the same percentage as price, the demand is said to has a unitary elasticity.

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Elastic Demand
If a one percent change in price causes greater than a one percent change in quantity demanded of a good, the demand is said to be elastic.

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Inelastic Demand:
When a change in price causes a less than a proportionate change in quantity demanded, demand is said to be inelastic.

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Amity business school presentation on supply

MEANING OF SUPPLY
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Supply refers to the schedule of the quantities of good that the firms are able and willing to offer for sale at various prices. Supply should be distinguished from the quantity supplied. Whereas supply of a commodity is the entire schedule of the quantities of a commodity that would be offered for sale at all possible prices. First , Supply is a flow concept- it refers to the amount of a commodity that the firms produce and offer for sale. Second , the quantity supplied at a commodity which the producers plan to produce and sell at a price not necessarily the same as the quantity actually sold.

SUPPLY FUNCTION
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The quantity of a commodity that firms will be able and willing to offer for sale in the market depends on several factors. The factors determining supply of a commodity are: The price of the commodity The price of inputs used for the production of the commodity The state of technology. The number of firms producing and selling the commodity The prices related goods produced Future expectations regarding prices.

LAW OF SUPPLY
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Supply of a commodity is functionally related to its price. The law of supply relates to this functional relationship between price of a commodity and its quantity supplied. In contrast to the inverse relationship between the quantity demanded and the changes in price, the quantity supplied of a commodity generally varies directly with price. That is the higher the price, the larger is the quantity supplied of a commodity.

EXPLANATION OF LAW OF SUPPLY:

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It has been observed that price of a product and quantity supplied of it by firms producing it are positively related to each other i.e; at a higher price more is supplied and vice versa, other things remaining constant. The higher price of a product, given the cost per unit of output, makes it profitable to expand output and offer more quantity of the product for sale. Thus higher price serves as an incentive for the producer to produce more of it. The higher the price, the greater the incentive for the firm to produce and supply more of a commodity, other things remaining constant. The basic reason behind law of supply is the way cost changes as output is expanded to offer more for sale.

SHIFTS IN SUPPLY

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A change in any variable other than price that influences quantity supplied produces a shift in the supply curve or a change in supply. Factors that shift the supply curve include:
Change in input costs
Increase in technology Change in size of the industry

DECREASE IN SUPPLY CURVE

INCREASE IN Amity Business School SUPPLY CURVE

FACTORS DETERMINING SUPPLY

a) b) c) d) e) f) Production technology Price of inputs Prices of related products Number of producers Future price expectations Taxes and subsidies

Amity Business School

Amity Business School

Reference:
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Principles of MicroeconomicsH.L.Ahuja