Applied Economics Lesson 5, Slides of Economics

Download Applied Economics Lesson 5 and more Slides Economics in PDF only on Docsity! APPLIED ECONOMICS LESSON 5: THE DEMAND CURVE Prepared by: Melvin O. Alejandrino WHAT IS DEMAND CURVE? Demand Curve is the schedule of willingness of consumers to buy commodity at alternative prices at a given point in time other things are constant. LAW OF DEMAND Always remember, price and demand are always contrast. Price Demand Price Demand SURPLUS AND SHORTAGE Supply>Dema nd Supply< Demand EQUILIBRIUM Supply = Demand FACTORS AFFECTING DEMAND 1. Income 2. Prices of other Commodities 3. Expectations 4. Taste 5. Market 1. INCOME The higher the income, the higher capacity to consume. 2. PRICES OF OTHER COMMODITIES The demand of a product depends on the price of other familiar products. 1. Substitute goods – When the price of beef increases, the demand for chicken increases. Chicken is a substitute good. 2. Complimentary goods – when the price of bread decreases, demand of spreads increases. 5. MARKET Increasing population can contribute to expansion of existing markets. Infants Teenagers Youth Adults SUBSTITUTION EFFECT A consumer will always find a cheaper substitute to expensive goods. INCOME EFFECT The higher income, the higher purchasing power.