Competitive Markets

Demand and Supply

Learning Outcomes:
● Explain the inverse relationship between price and
quantity demanded.
● Describe the relationship between an individual
consumer’s demand and market demand.
● Explain the Demand curve represents relationship
between price and quantity demanded.
● Draw a Demand curve.
 Demand
● The quantity of a good or service that
consumers are willing and able to buy at a
given price during a specific time period.
 Individual Demand

Demand Schedule:

● a list of prices & quantities that show the

amount demanded at each price for a given
time period.
 Demand Schedule

Price of Sodas Quantity of Sodas Demanded per week

1 500

2 400

3 300

4 200

5 100

Sketch the above Demand Schedule.

 Law of Demand:
Law of Demand There is an inverse
relationship between a good’s
Price and Quantity
Demanded.

As the Price of a good

INCREASES, the Quantity
Demanded of that good
DECREASES.

As the Price of a good

DECREASES, the Quantity
Demanded of that good
INCREASES.
 Reasons for the Law of Demand
Income Effect:
The change in an
individual's income and
how that change will impact
the quantity demanded of a
good or service.
The relationship between
income and the quantity
demanded is a positive
one.
As income increases, so
does the quantity of goods
and services demanded.
http://www.investopedia.com/terms/i/income
effect.asp
Substitution Effect: Law of Diminishing
Marginal Utility
As the Price of a good
decreases, individuals States as we consume each
switch from other additional unit of a good, it
substitute goods to that becomes less satisfying than
product because the price the previous one.
is lower.
There is an inverse
relationship.
http://pnwboces.schoolwires.net/cms/lib03/NY24000991/
Centricity/Domain/45/Supply.Demand.4_pic0005.png
 Individual Demand to Market Demand

Individual Demand:
The demand of the individual, person X.

Market Demand:
When we consider other individuals, person Y
then
Quantity Demanded X + Y = Market Demand