MINIMALIST PRESENTATION

Theory of demand and supply

By Mariya Abba Dantata

Index

What is it?

Terminology

Graphical definition

Real life application

Evidence

Thank you

Terminology

• Demand - is an economic principle that refers to a consumer's willingness and ability to purchase goods and services and pay the price (Demand Definition - Microeconomics, n.d.).
• Supply - is an economic principle that refers to a producer's willingness and ability to supply goods or services at a given time period(Tutor2u | Explaining the Theory of Supply, 2021).
• Equilibrium price - the price at which the quantity demanded and quantity supplied are equal.
• Purchasing power - the number of goods or services that can be bought with a certain monetary unit at a given time or a person's ability to purchase goods or services at a given time
• Scarcity - refers to the unlimited wants and needs of humans and limited resources to statisfy those needs (Pettinger, 2019).
• Opportunity cost - the next best alternative forgone.
• Subsidies - a form of direct or indirect payment from the government to private companies to correct market failure or to simply keep the business alive. This could be in cash form or tax reductions (Subsidy Definition, n.d.).

What is it?

By definition, the law of demand and supply is that the price of products is determined by the willingness of consumers to buy products and producers to supply said products (Law of Supply and Demand Definition - Economy, n.d.).

Graphical definition

The equilibrium price is determined by the quantity of products supplied, and the quantity demanded. This graph is used to predict the influence of price changes that would affect the quantity demanded. Companies also use them to predict how changes in demand and supply would affect their businesses.

(Boyce, n.d.)

The graph illustrates how changes in demand and supply affect price.

Demand curve

Movement along the demand curve increases or decreases the quantity demanded while reducing or increasing the price. Simply put, the quantity demanded is indirectly proportional to the price. Demand changes when the price falls, but every other factor remains the same.

(Pettinger, 2020)

The graph shows movement along the demand curve.

Demand curve

When the demand curve shifts inwards (from D to D1), there is a fall in quantity demanded at the same price as the original curve. When the demand curve shifts outwards (from D to D2), there is an increase in quantity demanded at the same price as the original curve. The shift in the demand curve is caused by factors other than price.

(Changes in Demand | Extension, Contraction, Fall , Rise, n.d.)

The graph shows movement along the supply curve.

Supply curve

Movement along the supply curve increases or decreases the quantity supplied while also increasing or reducing the price. Simply put, the quantity supplied is directly proportional to the price. Supply changes like this when the price changes, but every other factor remains the same.

(Pettinger, 2020)

The graph shows movement along the supply curve.

Supply curve

When the supply curve shifts inwards (from S to S2), fewer products are being supplied at the same price. When the supply curve shifts outwards (from S to S1), it means more products are being supplied at the same price as the original curve. The shift in the supply curve is caused by factors other than price.

(Does This Explanation Pertaining to the Supply Curve and Law of Supply Make Sense?, 2018)

The graph shows shifts in the supply curve and how it affects the price.

Graphical definition

The equilibrium price is determined by the quantity of products supplied, and the quantity demanded. When the curve shifts completely, it creates a new equillibrium price. This graph is used to predict the influence of price changes that would affect the quantity demanded. Companies also use them to predict how changes in demand and supply would affect their businesses.

(Pettinger, 2020)

The graph illustrates how shifts in demand curve and supply curve affect price.

Real life applications

• If supply increases and demand remains the same, then the price decreases. Example of Fursa maize flour (300 naira to 250 naira)(Melnyck, 2018).
• Price determination by the invisible hand. Consumers want the best quality at the lowest possible price. Producers, especially private companies, want to maximize profit(Supply and Demand Examples, n.d.).
• If supply decreases and demand remains the same, then the price increases. Example of Fursa rice (16,500 naira to 21,000 naira due to lack of fertilizers and farmers' unwillingness to harvest rice)(Melnyck, 2018).

Demand and supply on a global economic scale

• China and the pandemic (Alderman, 2020)

• America, Russia and oil (Forbes, n.d.)
• Africa and cocoa beans (Shahbandeh, n.d.).

References

Alderman, L. (2020, April 2). The World Needs Masks. China Makes Them, but Has Been Hoarding Them. (Published 2020). The New York Times. Retrieved April 27, 2022, from https://www.nytimes.com/2020/03/13/business/masks-china-coronavirus.html Boyce, P. (n.d.). What is Supply and Demand? (Curve and Graph). BoyceWire. Retrieved April 25, 2022, from https://boycewire.com/supply-and-demand/ Changes in demand | extension, contraction, fall , rise. (n.d.). Dineshbakshi. Retrieved April 26, 2022, from https://www.dineshbakshi.com/a-level-economics/price-system-and-microeconomy/revision-notes/487-shifts-of-demand-curve China's economy grows 18.3% in post-Covid comeback. (2021, April 16). BBC. Retrieved April 27, 2022, from https://www.bbc.co.uk/news/business-56768663 Demand Definition - Microeconomics. (n.d.). Investopedia. Retrieved April 25, 2022, from https://www.investopedia.com/terms/d/demand.asp Does this explanation pertaining to the Supply Curve and Law of Supply make sense? (2018, January 4). Economics Stack Exchange. Retrieved April 25, 2022, from https://economics.stackexchange.com/questions/19952/does-this-explanation-pertaining-to-the-supply-curve-and-law-of-supply-make-sens Equilibrium Definition - Economics Microeconomics. (n.d.). Investopedia. Retrieved April 26, 2022, from https://www.investopedia.com/terms/e/equilibrium.asp Forbes. (n.d.). Why Are Oil Prices So High When The U.S. Remains One Of The World’s Largest Producers? Retrieved April 27, 2022, from https://www.forbes.com/sites/daneberhart/2021/11/13/why-are-oil-prices-so-high-when-the-us-remains-one-of-the-worlds-largest-producers/?sh=4d11e69fddfc Law of Supply and Demand Definition - Economy. (n.d.). Investopedia. Retrieved April 25, 2022, from https://www.investopedia.com/terms/l/law-of-supply-demand.asp Melnyck, R. (2018, July 9). Supply and Demand Real Life Examples That Will Help You! Prime Your Pump. Retrieved April 27, 2022, from https://primeyourpump.com/2018/07/09/supply-and-demand-real-life-examples/ Pettinger, T. (2019, June 25). Scarcity in economics. Economics Help. Retrieved April 26, 2022, from https://www.economicshelp.org/blog/586/markets/scarcity-in-economics/ Pettinger, T. (2020, August 6). Diagrams for Supply and Demand. Economics Help. Retrieved April 20, 2022, from https://www.economicshelp.org/blog/1811/markets/diagrams-for-supply-and-demand/ Shahbandeh, M. (n.d.). Cocoa industry - statistics & facts. Statista. Retrieved April 28, 2022, from https://www.statista.com/topics/3211/cocoa-industry/ Subsidy Definition. (n.d.). Investopedia. Retrieved April 26, 2022, from https://www.investopedia.com/terms/s/subsidy.asp Supply and Demand Examples. (n.d.). Example Articles & Resources. Retrieved April 25, 2022, from https://examples.yourdictionary.com/supply-and-demand-examples.html tutor2u | Explaining the Theory of Supply. (2021, March 28). Tutor2u. Retrieved April 25, 2022, from https://www.tutor2u.net/economics/reference/theory-of-supply

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