SS2 Lesson Note on the Principles of Demand and Supply

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CLASS: SS 2

TOPIC:   PRINCIPLES OF DEMAND AND SUPPLY

CONTENT:

1. Meaning of and Factors affecting Demand
2. Meaning of and Factors affecting Supply
3. Movement along and Shift in Demand and Supply Curve

DEMAND can be defined as the quantity of a commodity that an individual is willing and able to buy at a specific price within a given period of time. Demand is more than the desire to have something. It must be backed with the ability to pay the price.

LAW OF DEMAND: This law states that there is an inverse relationship between the price and the quantity of produce demanded.  It therefore means that the higher the price the lower the quantity demanded.

DEMAND SCHEDULE: Makes the law of demand explicit. It shows the relationship between the price and the quantity of the commodity demanded. Demand schedule shows the amount of a commodity that a person will buy at various prices in a given period.

 

PRICE (N)	QUANTITY DEMANDED (Kg)
100	10
80	20
60	30
40	40
20	50

 

DEMAND CURVE: This is the representation of a demand schedule in a graphical form. It shows the relationship between the price of a commodity and the quantity bought at each price. The slope is negative because the aim of consumer is price reduction

FACTORS AFFECTING THE DEMAND OF AGRICULTURAL PRODUCE

1. The price of commodity
2. The price of other commodity
3. Level of consumer income
4. Population
5. Weather
6. Future expectation
7. Technology
8. Advertisement
9. Government policy
10. Social events and festival

MOVEMENT ALONG DEMAND CURVE

This refers to increase or decrease in the quantity of commodity demanded as a result of rise or fall in the price of the commodity. This represents a movement along the same demand curve.

SHIFT IN DEMAND CURVE

This is a change in the demand other than the change in the price of a commodity eg a change in consumers’ income will result in a shift in the demand curve either to the right or to the left. When the shift is to the right it indicates an increase in demand and vice versa. Demand curve can shift through the following:

1. Increase or decrease in consumer income
2. Shift in consumer taste and preferences
3. Prices of other related products

ELASTICITY OF DEMAND

It means the degree of responsiveness of demand to a slight change in price

TYPES OF ELASTICITY OF DEMAND

1. UNITARY ELASTICITY: This is a change in price which causes an equal change in demand, E =1
2. INELASTIC DEMAND: this is when a change in price causes small change in the demand, E <1
3. ELASTIC DEMAND: it is when a change in price causes greater change in demand, E>1
4. ZERO ELASTICITY/PERFECT INELASTIC: demand remains unchanged as a result of changes in price, E=0
5. PERFECT ELASTICITY/INFINITE ELASTICITY: the demand changes as a result of constant price,E=infinite

EVALUATION

1. Define the term demand and state five factors affecting change in demand
2. State the law of demand with illustration

SUB TOPIC 2: SUPPLY

Supply is defined as the quantity of a commodity that producer is willing and able to offer for sale at a given price over a particular period of time. The quantity offer for sale in the market is known as effective supply.

LAW OF SUPPLY: It states that there is direct or positive relationship between the price and the quantity offered for sale. Conversely, the higher the price, the higher the quantity offered for sale and vice versa.

SUPPLY SCHEDULE: It is a table showing a relationship between the price and the quantity supplied

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