DEMAND AND SUPPLY

Group 4

INTRODUCTION
The

main task of the managers is to make good decisions. Taking right decisions help in increasing the value of organization.

WHAT IS PROFIT

Economist view of profit

Accountant view of profit

WHAT IS MARKET
BUYER & SELLER >>> PRICE

WHAT IS DEMAND
Demand Demand

= Desire+ Ability+ Willingness

has inverse relationship with price

DEMAND SIDE OF MARKET

Demand

side of market refers to consumers

and the price they are willing to pay for buying certain quantity of a product during a period of time.

FACTORS AFFECTING DEMAND

Price Income Tastes/

habit /fashion

Advertisement Price

of substitutes

Government
Weather

regulation

condition

LAW OF DEMAND
According

to Alfred Marshall Other things beings

equal more will be demanded at a lower price and diminished at a higher price.

WHAT IS SUPPLY
Quantity

of goods or services which an

individual producer or a firm is willing to sell at various prices.

Supply

has direct relationship with price.

SUPPLY SIDE OF MARKET

Market

supply refers to the sum of all

individual supplies for all sellers of a particular good or service.

LAW OF SUPPLY
According

to Alfred Marshall Other things being

equal more will be supply at a higher price than at a lower price.

FACTORS AFFECTING SUPPLY

Price

of the commodity in technology

Change Cost

of factors

Climate Import

and export

EQUILIBRIUM

DEMAND CURVE SHIFT

SUPPLY CURVE SHIFT

PRICE ELASTICITY OF DEMAND

It

defined as the ratio of percentage change in

quantity demanded to a percentage change in

price. Types
Perfectly

elastic

 Perfectly

inelastic

 Relatively

elastic

 Relatively

inelastic

 Unit

elastic

POINT ELASTICITY

ARC ELASTICITY

THE EFFECT OF PRICE ON FIRM REVENUE

Helps

the manager to increase the firms total

revenue.
Estimate

whether to increase or decrease the

price.

DETERMINANTS OF PRICE ELASTICITY OF

DEMAND
Nature
Income Substitutes

of product

TOTAL REVENUE, MARGINAL REVENUE&

PRICE ELASTICITY

Total Revenue =Quantity Sold X Price Per Unit Determines total revenue

MARGINAL REVENUE
ED is elastic E>1 price increases > revenue decreases ED is unitary E=1 price increases > revenue increases ED is inelastic E<1 price increases > revenue increases

Marginal

Revenue is the additional revenue that will be generated by increasing product sales by 1 unit.

INCOME ELASTICITY
Price

increases while income stays the same,

demand will decrease

The

degree to which an increase in income will

cause an increase in demand. Determinant of income elasticity of demand

Necessities

Luxuries Inferior

goods

CROSS PRICE ELASTICITY

The

rate of response of quantity demanded of one good, due to a price change of another good

ADVERTISING ELASTICITY OF DEMAND

Effect of an increase or decrease in advertising on a market

Group Members : Rushita Usapkar Shilton Pereira Swanand Vaze Tanvi S Desai Gupti Kunkolkar Neha Satardekar Ashwin Lawande