1. Demand Supply ApproachDemand Supply Approach

2. Supply and Demand Analysis
1. The demand schedule
2. The demand curve
3. Demand shifts
Elasticity of demand
4. Price elasticity of demand
5. Calculating elasticities
6. Elasticity and revenue
7. Income elasticity of demand
8. Cross elasticity of demand
9. Analysis of supply
10. The supply schedule
11. The supply curve
12. Behind the supply curve
13. Shift in supply
14. Price elasticity of supply
Equilibrium of supply and demand curves
15. Equilibrium with supply and demand curves
16. Effect of shift in supply or demand
17. Interpreting the changes in prices and quantity
18. Simultaneous shift in supply and demand
19. Rationing by prices
Applying supply and demand
20. Impact of a Tax on price and quantity
Prices fixed by law
21. Minimum floor and maximum ceilings

3. Demand FunctionDemand Function
Amount of goods that a consumer isAmount of goods that a consumer is
willing top buy and able to purchasewilling top buy and able to purchase
over a period of time is known asover a period of time is known as
quantity demanded for that goodquantity demanded for that good
Flow conceptFlow concept
Demand is relationship betweenDemand is relationship between
price and quantity demanded otherprice and quantity demanded other
things remaining constantthings remaining constant
XX11 = f {P= f {P11}}

4. Demand ScheduleDemand Schedule
PricePrice
Quantity DemandedQuantity Demanded
500500 10 lakhs10 lakhs
450450 11 lakhs11 lakhs
400400 12 lakhs12 lakhs
350350 13 lakhs13 lakhs
300300 14 lakhs14 lakhs
250250 15 lakhs15 lakhs
200200 16 lakhs16 lakhs
150150 17 lakhs17 lakhs

5. Demand CurveDemand CurvePrice
Demand
Demand Curve
0
Y
X

6. Law of DemandLaw of Demand
Demand curve depicts the inverseDemand curve depicts the inverse
relationship between price and quantityrelationship between price and quantity
demandeddemanded
Downward slopingDownward sloping
Other things remaining the same, if theOther things remaining the same, if the
price of any good decreases its quantityprice of any good decreases its quantity
demanded increases and vice versademanded increases and vice versa
Exceptions – Giffen Goods, Veblen effect,Exceptions – Giffen Goods, Veblen effect,
Future expectations, share marketFuture expectations, share market

7. Factors influencing the Demand CurveFactors influencing the Demand Curve
Prices of close substitutes andPrices of close substitutes and
complementscomplements
Income of the consumerIncome of the consumer
Existing wealth of the consumerExisting wealth of the consumer
Change in the testes and preferencesChange in the testes and preferences
of the consumerof the consumer
Expectations regarding futureExpectations regarding future
changes in the priceschanges in the prices
PopulationPopulation
Special influence – season, lawSpecial influence – season, law

8. Increase in Demand (Shift in demand curve)Increase in Demand (Shift in demand curve)
An increase in incomeAn increase in income
An increase in wealthAn increase in wealth
An increase in prices of substitutesAn increase in prices of substitutes
A decrease in the prices ofA decrease in the prices of
complementscomplements
A change in the taste andA change in the taste and
preferences in favor of goodpreferences in favor of good
Expectations of a future increase inExpectations of a future increase in
price of a goodprice of a good

9. Increase in demandIncrease in demandY
0 X
Old Demand
Curve
New Demand
Curve
Price
Quantity Demanded

10. Decrease in Demand (Shift in demand curve)Decrease in Demand (Shift in demand curve)
An Decrease in incomeAn Decrease in income
An Decrease in wealthAn Decrease in wealth
An Decrease in prices of substitutesAn Decrease in prices of substitutes
A Increase in the prices ofA Increase in the prices of
complementscomplements
A change in the taste andA change in the taste and
preferences against the goodpreferences against the good
Expectations of a future decrease inExpectations of a future decrease in
price of a goodprice of a good

11. Decrease in demandDecrease in demandY
0 X
Old Demand
Curve
New Demand
Curve
Price
Quantity Demanded

12. Changes in Quantity Demanded vs. Changes in DemandChanges in Quantity Demanded vs. Changes in Demand
Changes in quantityChanges in quantity
demandeddemanded
P
P2
P1
0
Q1 Q2
D
D
X
Changes in demandedChanges in demanded
P
P2
P1
0
Q1 Q2
D
D
D1
D1
X