Week 5 & 6 Notes on Demand & Supply PDF

**[WEEK 5]** **[THEORY OF DEMAND]** **[DEMAND]** Demand refers to the quantity of a commodity which consumers are willing and able to purchase at a particular price and at a particular time. **Effective demand** refers to a want or need backed up by the willingness and ability to pay for the com...

**[WEEK 5]** **[THEORY OF DEMAND]** **[DEMAND]** Demand refers to the quantity of a commodity which consumers are willing and able to purchase at a particular price and at a particular time. **Effective demand** refers to a want or need backed up by the willingness and ability to pay for the commodity at a particular price and time. **LAW OF DEMAND** The law of demand states that, "The higher the price of a commodity, the lower the quantity demanded, and the lower the price, the higher the quantity demanded, Ceteris paribus". **DEMAND SCHEDULES** Demand schedule can be defined as a table showing the relationship between prices and the quantity of that commodity demanded. **It is of two types;** i\. Individual demand schedule ii\. Market (aggregate) demand schedule **INDIVIDUAL DEMAND SCHEDULE** This is a table which shows the different quantities of a commodity which a consumer would purchase at various prices, at a particular time. **[DEMAND SCHEDULE FOR MILK FOR MR. AUSTIN]** **PRICE PER TIN (N)** **QUANTITY DEMANDED** ----------------------- ----------------------- 100 10 80 20 60 25 40 30 20 50 **[MARKET DEMAND SCHEDULE]** A market demand schedule is a table which shows the total quantities of a commodity which all consumers of that commodity are willing to buy at various prices at a particular period of time. This is also referred to as an aggregate demand schedule, a total demand schedule, or a composite demand schedule. **[MARKET DEMAND SCHEDULE FOR MILK ]** **Price per tin (N)** **Quantity Demanded By** **Total** ----------------------- -------------------------- ----------- --------- ---------- ----- Mr. Ojo Mrs. Ade Mr. Ayo Mrs. Oke 100 10 5 10 5 30 30 20 10 20 10 60 60 25 15 30 20 90 40 30 20 40 30 120 20 50 25 50 40 165 **[DEMAND CURVE ]** Demand curve is graph showing the relationship between the price and quantity of a commodity demanded at any point in time. **Individual Demand Curve** **FACTORS AFFECTING DEMAND** 1. **Price of the Commodity** 2. **The price of other Commodities** 3. **Government Policy** 4. **Taste and Fashion** 5. **Income of the Consumer**. 6. **Weather and Climate** 7. Advertisement 8. Taxation on commodities 9. The size of population 10. An expectation of future changes in prices **TYPES OF DEMAND** 1. **Complementary Demand or Joint Demand:** There is joint demand if two or more commodities are required together to satisfy a particular want. 2. **Competitive Demand:** This type of demand occurs with commodities which are close substitutes. 3. **Derived Demand:** There is a derived demand for a commodity if not required for direct satisfaction but for the production of another commodity which can give direct satisfaction. E.g. Flour is demanded to make bread which people will consume. 4. **Composite Demand:** Demand is composite when a commodity can be used for more than one purpose. For example, palm oil is demanded for cooking, making soap, etc. **ASSIGNMENT** 1. Define Demand 2. State and explain five (5) factor affecting demand **WEEK 6** **THEORY OF SUPPLY** The supply of a commodity is the quantity of that commodity which sellers are willing and able to offer for sale at a particular price, at a particular period of time. Effective supply refers only to the part of the total production actually offered for sale at the ruling market price and at a particular time **SUPPLY SCHEDULES** Supply schedule can be defined as a table showing the relationship between price and the quantity of that commodity supplied. **There are two types of supply schedules;** - Individual supply schedule - The market (total of aggregate) supply schedule. **Individual Supply Schedule:** This is a table which shows the different quantities of a commodity which a producer or seller offers for sale at various prices and at a particular time. **INDIVIDUAL SUPPLY SCHEDULE (FOR SUGAR) FOR MR. GBENGA** **PRICE PER PACKET (N)** **QUANTITY SUPPLIED (PER WEEK)** -------------------------- ---------------------------------- 250 100 200 80 150 60 100 40 50 20 The supply schedule in table shows that less is supplied at lower prices. **MARKET SUPPLY SCHEDULE** This is table which shows the total quantities of a commodity which all the sellers of that commodity are willing to sell at various prices, at a particular period of time. It is a combination of the individual supply schedules of all the sellers of a particular commodity. **MARKET SUPPLY SCHEDULE FOR SUGAR** **Price per packet (N)** **Quantity Supply By** **Total quantity supplied (per week)** -------------------------- ------------------------ ---------------------------------------- --------- ----- Mr. Ojo Mrs. Ade Mr. Ayo 250 100 100 50 250 200 80 90 30 200 150 60 70 20 150 100 40 50 10 100 50 20 25 5 50 **SUPPLY CURVES** Supply curve can be defined as a graph showing the relationship between price and quantity of that commodity supplied. **LAW OF SUPPLY** The law of supply states that "The higher the price of a commodity, the higher the quantity supplied while the lower the price, the lower the quantity of the commodity that will be supplied. **TYPES OF SUPPLY** 1. **Composite Supply:** This refers to the supply of a commodity to satisfy two or more purposes e.g crude oil for pms, kerosene, gas etc. 2. **Competitive Supply:** This type of supply occurs with commodity that has alternative uses. If supply to one use it increased, supply to other uses would fall. For example, and increase in the use of land for building would decrease land for farming. 3. **Joint Supply:** Joint supply occurs when two or more commodities are produced and supplied from one source. An increase in the production and supply of one will automatically bring about increase in the production and supply of the other. 1. **Price of other commodities** 2. **Taxation** 3. **Weather** 4. **The number of producers** 5. **Government Policy** 6. **Technological Development**