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Micro Economics
Objectives
Enabling the students to learn about
Fundamentals of demand and supply.
Define demand with the help of demand
curve.
The movement along the demand curve
the shifts of the demand curve.
Determinants of Demand
Economic problem
Scarcity
Differentiate micro & macro
Positive & normative economics
Opportunity cost
3 big questions
Factors of production
Trade off
Model building
PPF
Markets
Market Types
Goods Market
Money Market
Labour Market
Capital market
Consumer
Consumer is a
broad label for
any individuals or
households that
use goods and
services
generated within
the economy.
Demand
Utility
Demand in Markets
A households decision about the
quantity of a particular output to
demand depends on:
ANNA'S DEMAND
SCHEDULE FOR
TELEPHONE CALLS
PRICE
(PER CALL)
$
0
0.50
3.50
7.00
10.00
15.00
QUANTITY
DEMANDED
(CALLS PER
MONTH)
30
25
7
3
1
0
A demand
schedule is a
table showing
how much of a
given product a
household would
be willing to buy
at different prices.
Demand curves
are usually
QUANTITY
DEMANDED
(CALLS PER
MONTH)
30
25
7
3
1
0
Activity
Think about any product that you
wanted to purchase these days.
Make your table, showing increase
or decrease in prices and then
make your demand curve.
Law of Demand
Determinants of Demand
Market price
Consumer income
Tastes
Expectations
Number of buyers and sellers
Substitutes
Complements
Factors determining
demand
Substitute goods
Complementary goods
Acomplementary goodis
agoodwhose use is related to the use
of an associated or pairedgood.
The goods which are complementary
with each other, the change in price of
any of them would affect the demand of
the other.
Tea and sugar
Car and petrol
It doesn't just matter what is currently going on one's expectations for the futurecan also affect
how much of a product one is willing and able to
buy.
Example: if you hear that Apple will soon
introduce a new iPod that has more memory and
longer battery life, you may decide to wait to buy
an iPod until the new product comes out. When
people decide to wait, they are decreasing the
current demand for iPods because of what they
expect to happen in the future.
Changes in determinants
of demand, other than
price, cause a change in
demand, or a shift of the
entire demand curve,
from DA to DB.
Higher income
increases the
demand for a
normal good
Change in Demand
Price of
Cigarettes
per Pack
$4.0
0
Changes in Quantity
Demanded
C
2.00
D1
0
12
20
Number of
Cigarettes Smoked
Consumer Income
Price of
Ice-Cream
Cone
$3.0
0
2.5
0
2.0
0
1.5
0
1.0
0
0.5
0
Normal Good
Increase
in demand
An
increase
in
income...
D1
0 1
2 3 4 5 6 7 8 9 10 11 12
D2
Quantity
of IceCream
Consumer Income
Price of
Ice-Cream
Cone
$3.0
0
2.5
0
2.0
0
1.5
0
1.0
0
0.5
0
Inferior Good
An
increase
in
income...
Decrease
in demand
D2
0 1
D1
2 3 4 5 6 7 8 9 10 11 12
Quantity
of IceCream
Activity
Answer please!!!