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WEEK 4
CONCEPT OF DEMAND AND SUPPLY
Content
- Price System
- Definition, Demand Schedule and Curves
- Law of Demand
- Factors affecting demand
Sub-topic One: Price System
Price System
This refers to the mechanism by which prices of goods and services are determined by the forces of demand and Supply
Function of Price System
- It determines the allocation of scarce resources: if resources become scarce, their prices will be high. Therefore, only those who essentially need them will afford to buy them.
- It influences production pattern: through prices that consumers are willing to pay, suppliers are able to identify commodities that are in high demand and are able to adjust their production pattern. This is done to make high profits
Concept of Demand
Demand may be defined as the quantity of a commodity which a consumer is willing and able to buy at a given price and at a particular period of time. In the ordinary meaning of demand, it is known as “want or desire”. But in Economics, demand is not mere desire or want. It is the quantity of a commodity people want, and at the same time, able to buy at a particular price.
For instance, most people want to buy cars, buy a good house, but since they cannot afford to pay for these, their desire will not constitute demand.
Demand Schedule
A demand schedule means an orderly, tabular presentation that shows the quantity of a commodity demanded at various prices in a given period of time. It can be individual demand schedule or market demand schedule.
Individual Demand Schedule: This is the table showing the quantities of commodity bought by an individual at different prices. Below is an example of individual demand schedule.
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