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- Course
- Introduction to Economics
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- Nelson Mandela Metropolitan University (NMMU)
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Faculty of Business & Economic SciencesECO1001 Chapter 5 – Demand and supply applied
Clifford Johnson
, Chapter Outcomes
Once you have studied this chapter you should be able to
• explain how equilibrium price and quantity in the market is affected by:
• Changes in demand
• Changes in supply.
• predict the effects of simultaneous changes in demand and supply.
• analyse the interaction between related markets.
• Show the effects of government intervention markets, for example by
setting minimum or maximum prices.
, Demand
Determinants of Demand
• The quantity of goods demanded by an individual (household) in a particular
period of time depends on (function of), a) the price of the good, b) prices of
related goods, c) income of the individual, d) taste and e) the number of
individuals in the household.
• Symbolically we can denote demand as:
• QD = quantity demanded (dependent variable)
• Px
• Pg
• Y Independent variables
• T
• N
• QD = f (Px , Pg , Y , T , N, …)
, Changes in demand
• Increase in demand
• QD :
• Px - quantities demanded ▪ .
• Pr
• Y Change in
• T DEMAND
• N
• QD = f (Px , Pg , Y , T , N, …)
• Initial E, P0 ,Q0
• DD P1 Q1
• NEW E1
Figure: Changes in demand
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