Demand and Supply

Next unit is supply and demand and first of all we will define demand. So friends what is demand? Demand is quantity of a product which a consumer is willing and has the ability to purchase at any given price during a given period of time and all the other factors remains unchanged. What it means is the quantity of a product which a consumer is willing and has the ability to purchase at the given price. For example, if we are talking about an apple then the one kg of apple is 100 rupees. If this person is buying at a given time and if he is able to purchase at any given time in a given period of time. he is willing to purchase them and he has the ability to purchase the 100 Rs. 1 kg apple at any time, the time we are talking about, so what is called demand. Okay, that is called demand. Then it is law of demand. Law of demand. Law of demand says that the relationship of price and quantity that is inversely related. What it means to say is that if the price increases, then the quantity will decrease. If 1 kg apple is available for 100 Rs. So if it has the ability to purchase 500% If the rate of that 1 kg apple is 200, then the purchasing power of people will also decrease. Decrease means that less people will be able to purchase. Let it be 250 here. Okay, so it means that price and quantity are inversely related according to the law of demand. Law of demand expresses the inverse relationship between the price and quantity demanded of a commodity. That is, the price and quantity relationship between any commodity that is demanded is inversely related. Okay, and this law is based upon the law of diminishing marginal utility. The demand curve has a negative slope. Negative slope means if we draw a graph here, P represents price and Q representing quantity. Okay. Okay, then if the price is rising, then it will remain like this. That is, the price is rising at a high price. Let it be 1, 2, 3. Okay, and here also 1, 2, 3, 4. So if your price is rising, then your quantity remains low. But if you drop your price, then the number of quantity sold increases. But one thing to keep in mind here. The other factor is the same. The other factors are unchanged. Only price is changing and quantity is changing. Okay, and the law of demand is explained with the help of the schedule curve. We call this the schedule curve because in this we look at different prices and see how much quantity is being sold out. Okay, we look at different quantities of the commodity and see how much quantity we are selling at what price. Okay, and the demand curve is influenced by some factors like income, size of market, substitutes, or the alternatives. What is the taste, what are the preferences, what are the priorities, on all these things, the demand curve depends on us. And the demand schedule can be of two types. If we talk about the demand schedule, then it can be of two types. This is the demand schedule. This is the demand schedule. This is the individual demand schedule. Individual demand schedule. Okay, the individual demand schedule is defined in this way that the different quantities of a commodity. The individual consumer, okay, how he purchases it at different prices. Okay, the individual demand schedule means that we have taken out something for a person, for an individual. If it is different prices of a commodity, then how much quantity does he purchase of it? Okay, how much does he agree to buy it? That is called individual demand schedule. The second one is the market demand schedule. Market demand schedule. The market demand schedule is basically, we look at different quantities of commodities, how much we are selling out at different prices in the market. Okay, here we were looking at the individual and in the case of the market, we look at the number of people in a particular market, how many different quantities we are selling out at different prices. Okay, then we discussed some factors also. Like the average income said that the average income affects a lot how much demand will remain. And that is the key factor that how much demand will remain. If on one place. Let it be on the place. A. Average income is 50,000. And place B where the average income is 70,000. So, the normal thing is that 70,000 whose average income is there. There the ability to buy people, the buying capacity will also be more. Now, when the buying capacity is more, then the demand will also be a factor that will affect the demand. Okay. So, the average income affects a lot. Okay. Second is the size of market. If the population is 15,000 in this place. The size of market means that the place where you are going to sell your product. Okay. There is 15,000 persons in one place. And the people in the other place are 70,000. So, the normal thing is that where the population is more, that means where the market size is more. The product will be more sellable. Because where the population is more, the demand will also be more. Okay. Then it is the product of the related goods. Price of the related goods. What is the availability of the related goods? What is the price of them? Okay. Suppose there are two products of one type. They also have availability. But one has a price of one. So, the price of one is the price of the other. Okay. But one has a price of Rs. 100. The other has a price of Rs. 125. Most of the people will like to purchase it for Rs. 100. Because their basic needs are being fulfilled by this product. So, the related goods, the related products, if they also influence our demand. Then another factor is the tastes and preferences. Tastes or preferences. Suppose there are Maggi Tuna Noodles. Okay. Now, here we have taken out the Maggi with more spices in India. So, will this work in India? Why will it work? Because here people have a taste of eating spicy food. But if in Latin America they take out the spicy Maggi and sell it, then there will be less pieces. Because there people have no taste. Similarly, there is a lot of difference in the variety. What are people's preferences? What are the cultural preferences? What are the historical preferences? And what are their needs? Like if the area is very cold, then the need for liquids will be less. Okay. So, it depends on the preferences. What are people's preferences? What are people's tastes? What are their priorities? So, this also affects the demand a lot. Then the last one is the special influences. Special influences. Now, the special influences depend on your geographical situation. Like if we are in Rajasthan, then the demand for AC in Rajasthan will be more. Similarly, there is an area where the electricity cuts are more, there the demand for generators or inverters will be more. These are special influences which are condition-based. But there are some exceptions where the demand curve, the demand schedule we have discussed, the inverse relationship between the price and quantity, does not sit properly. Which does not require these conditions in this law. The first thing is the Giffen Paradox. We are talking about exceptions. So, the first thing that comes in it is the Giffen Paradox. Now, what is the Giffen Paradox basically? So, a simple example is, suppose the person A had the first income. 25,000. And which car did he have? Alto. Okay. Or if you add the average income. Personally, we don't say only one, we say the average income of a state. There the average income was 25,000 and the favorite car was Alto. Because in that price range, this car is set. Okay. But now, the average income of that state is 75,000. Okay. So, in that case, their priority is Alto. So, the demand of Alto will decrease. So, what it means to say is that, in the Giffen Paradox, basically, these are the scenarios that violate the above mentioned law, first of all. Where the demand of an inferior product decreases. Okay. Oppositely. Even if the price is low, but what happens? The demand of its quantity decreases. We call that the Giffen Paradox. The second case is regarding the necessities of life. Necessities of life. As we were talking about commodities, if the price of wheat reaches from 20 rupees per kg to 50 rupees per kg. Because that is necessity for life. So, its demand will not decrease. Okay. Third is the commodities of prestige. Third is the commodities of prestige. Where the product you have is very expensive. And the product you have is of very high quality. Even if the money is being taken more than you, still, that product becomes your favorite. Like iPhone. iPhone has increased its prices within one year. With a matter of 40,000 to 50,000. But still, the demand is the same. That is what? That is because it has a prestige. It has a valuation. Okay. And after that, the main concepts regarding the demand are like extension of demand. So, the first thing is that the extension of demand or contraction of demand, these are related to price related issues. Means, if the price decreases, then what will be the demand? It will increase as we studied. And what do we call this? It is called extension of demand. Okay. And oppositely, if the price, increases, then what will be the demand? It will decrease. That is called contraction of demand. And the other factors are unchanged in this. Okay. Then the third one is the increase of demand. When the price is unchanged, the price is neither increasing nor decreasing. But what is the demand there? It is increasing. Okay. But that is not due to falling price. That is due to some other factors. Increase in demand due to other factors. Due to other factors. That is called what? Increase of demand. And oppositely, if the demand is not decreasing due to increase in price, due to some other reason, that is decrease in demand due to other factors. It is called decrease of demand. That is called decrease of demand. Then the next topic is elasticity of demand. What is elasticity of demand? We can call it a ratio. We can call it a fraction. Fraction of what? Percentage change in demand. Percentage change in demand. To the percentage change in price. And what is demand? It is quantity basically. To the percentage change in price. This is called what? This is called elasticity of demand. So basically, if we look at it from the perspective of economics, okay, then the product, due to its change in price, its demand, the quantity of demand, how much is changing in that? What is that? It is called elasticity. And if there is higher demand elasticity of economic variable, then it means that the changes in the variable, that is in price or income, are making it more responsive. It is giving more response. So it means that if there is a change in price, then the demand is changing a lot. That means if the price changes a little, but the quantity demanded has changed a lot, then what will we call it? That it is very much responsive. So depending upon the degree of elasticity, we can specify it to the perfectly elastic, highly elastic, unitary elastic, and less elastic. Okay. So when does the perfectly elastic case happen? When your ED, elasticity of demand, tends to infinity. It tends toward infinity. And when is highly elastic? When your ED is greater than 1. That is greater than or equal to 1. And unitary elastic when ED is equal to 1. Okay. And less elastic when it is less than or equal to 1. Okay. And it is also said to be perfectly elastic again, when it is equal to 0. Now when will it be perfectly elastic? When it will be perfectly elastic, when even if you change a little, you have changed the price a lot, changed it very small, but your quantity demanded that tends to infinity. So in that case, what do we call it? Perfectly elastic demand. And in the case of highly elastic, the value of your ED, it is more than or equal to 1. In the case of unitary, it is equal to 1. And in the case of less elastic, it is less than or equal to 1. Okay. Then it is shifting and movement of demand. First of all, we will discuss the movement of demand. When only the price is changing, only the price is changing, what is the reason for that? Your quantity demanded is changing. And the commodity demand change, you define it on a single curve, okay, through different points. Like, if we talk about this case, what is here? What is the price? What is this? It is demand, that is quantity. And this is the price. And if the price is 100, then we say it is here. If we say the price is 200, then we say it is here. So basically, there is only one demand curve, where you are moving it from different points, moving the demand along the prices. So what do we call it? Movement along a demand curve, on the same demand curve. Okay. And we already discussed that if the price is changing, that is if the price is decreasing, then your demand is increasing, then we call it extension. We call it extension. And if it is decreasing, then we call it contraction. Okay, we already discussed these two concepts. Okay. Setting is, second is shifting. Now shifting of the demand curve. What does shift mean? What does shift mean? It means that the whole demand curve, what is happening? It is shifting, either upward or downward. Either the demand curve, the new demand curve, will come like this, or it will come upward, or it will come downward. What is this? It is original. This is your original demand curve. This is your shifted demand curve. What are these two? These are your shifted demand curves. Shifted demand curves. Okay. So, when does this change happen in demand? When the change in factors, not the price, are some other factors. Such as, the change in income, or the change in fashion. So, the whole demand curve, the price demand curve, sorry, the demand curve, that is the change in the whole. That is, it is either upward or downward. That is called increase in demand or decrease in demand. That we also discussed before. This is due to decrease in demand or due to, increase in demand. Okay. So, it was all about the demand. Now, we will study about the supply. That is law of supply. Okay. So, the definition of supply, law of supply says that, if your price is high, if your price is high, then the quantity that is being supplied, what will that be? It will be high. Okay. And if your price is high, then the quantity that is being supplied, will also be low. Okay. In the case of demand, what we were saying, in the case of demand, what was the law of that, it used to say that, the inverse relationship of price and quantity, if the price increases, then what will that be? The quantity will decrease. If the price is high, then the quantity will decrease. If the price is low, then the quantity will increase. That is, the demand will increase. And in this case also, that if the price is high, then the opposite is said, the law of supply says opposite, that if your price is high in the supply, then in the case of high price, everything will come that my product will sell more, then the production will also increase, manufacturing will increase, then the supply will also increase. But if the price is low, then everyone will want that we sell a low quantity at this low price. Then what will be your supply? It will be low. Okay. So there are some exceptions, there is an exception in this law of supply. So this law of supply, where does it not apply? It does not apply on agriculture products. Okay. On agriculture products. Sorry for the interruption. So I was saying that the agriculture products, whose supply is governed, it is governed by natural factors. So there the law of supply does not matter. There is no supply. We are talking about the law of supply. Okay. So in the case of agriculture products, where natural factors are governed, it does not apply there. Okay. Or where your valuables are ancient, and they are unique articles, so there too, the law of supply does not apply. Ancient coins and, unique articles, you can say, which are priceless, whose value is more. Third case is, where there are perishable goods. Where there are perishable goods. Which are perishable goods, which will be finished, will be finished. Suppose someone is selling food, so in that case, the seller will be ready to sell it even at low prices. Because he will not be waiting, and his stuff will be spoiled. Okay. So as we saw for demand, similarly, there are four things for supply. First of all, it is extension of supply. What is extension of supply? If your price increases, then the supply will also increase. And all the other factors are unchanged. Similarly, if your price is, and if the supply increases by increasing the price, then it is called extension of supply. Okay. And if your price is decreasing, then if your supply is decreasing, then it is called contraction of supply. Okay. And all the other factors are unchanged. All factors are, all other factors unchanged. All other factors are not changing. Okay. Only in that case. And the second thing is increase in supply. If there is no change in price, if there is any change in something else, then your supply, is increasing. So what we will call it? Increase in supply. Okay. Similarly, if there is no change in price, supply is decreasing for some other reason, then we will call it decrease in supply. Here, prices are not changed. Then the next topic is the equilibrium of supply and demand. Basically, what happens is, if we talk about demand, then primarily, it depends on the price. It depends on the price. Means, if your price will be less, then the demand will increase. And vice versa. Okay. And similarly, the supply we have, also depends on the same. When will supply increase? When your price will increase. So, primarily, the demand and supply depends on what? Depends on the price. What is the price of goods or services. Hence, the equilibrium price is determined. So, the equilibrium price is determined by demand and supply. So, equilibrium price is discovered by, it is determined by demand and supply. That the price, okay, the goods in the market, how much will satisfy the demand of the persons, in which price range will it satisfy the most, and the total demand for that market, total supply, how much will it remain? Okay. And the market demand curve, okay, the market demand curve, it is downward sloping. Whereas, the market supply curve, it is upward rising. The market demand curve, it is downward. And the market supply, it is upward. Like this. So, here are some scenarios, which we will discuss. And this is very important, for basic understanding, that how the demand supply curve, sets, if demand increases or decreases, supply increases or decreases, what is the effect on prices, what is the effect on quantity? Okay. So, basically, what is the case? First of all, our case is, if demand rises. If demand rises, okay, then what will happen in that case? The demand curve, will shift to the right. How? This is our market, this is our demand. Now, demand will increase, this is increasing, and this is increasing. So, what will happen to the right? It will shift. Okay. So, demand curve shifts to right. Then, demand curve shifts to right. Okay. And what will be the effect on prices, on quantity? Now, if demand is increasing, then basically, what is the case? Price will also increase, quantity will also increase. Demand also. When demand comes, demand comes more from the market. Suppose, understand through an example. Earlier, in the market, there were only 100% who wanted to buy Apple. Okay. Now, 100% of the market, they are buying Apple. Now, 100% of the market, they are buying Apple. Now, 100% of the market, they are buying Apple. Now, 100% if they wanted to buy Apple, then at that time, what is the case? Prices were also genuine and the supply was also fine. But, if the same Apple, they want to buy 1000%, then supply is also limited. Okay. Supply is also limited. So, if supply increases, then basically, price will also increase. Because, basically, the fund to increase supply is that price will increase, then only, supply will increase. Then only, supply will increase more. Then only, quantity will also increase. Okay. So, the price and quantity, both will increase. Both will increase. Both will increase. So, from here, basically, we have made a graph of our price and quantity. And, in between, we have made a demand curve. So, if our demand increases suddenly, what is demand? It increases suddenly. So, what is in it? Now, what more people want? That, if the demand is increased suddenly, then, what will happen? Now, what will happen? If the demand is increased suddenly, then, what will happen? Another thing people want is that, more, if we take the example of bread, let's say, there are 8-5 members of a family. So, now, every member will want that, what to do? Eat the bread. Eat the bread. So, what is basically what? The quantity will also increase. And, the price will also increase. And our demand curve will shift towards the right. Okay. So, basically, what will happen, if we see the demand and supply curve, then, the supply will increase. Because, the prices are increasing. So, supply to our increase hoge yes like I've a more up to supply to increase hoge hoge lekin to demand have a hobby Amari kiya hoge increase hoge to joke or a more up more right key taraf shift kerja and oppositely agar Amari demand to have a fall hoti hai tos case make a hogar to demand curve hey woke up kajaga jo de curve amara that will shift to left shift to left and those case make a hockey Joe prices and quantity don't get come on give both will decrease both will decrease up a domestic demand care bohzada come over here again this is our price and quantity graph and here it was before the demand curve and he hammer a supply curve and yaha per camera equilibrium price of the okay job read on oh it was a coin to set cut there so abhi agar Amara Joe demand to eat them say coffee come over here to say Joe consumption a boh become a geek to quantity be less hoge and Joe price hair boh be over less hoja a go because we know that according to law of demand other prices come at a demand be a hoey come over here to tomorrow demand curve where that will shift towards the left that is D dash okay this case make a head don't know Joe factors and at his price as well as quantity both will decrease Lake Kizuki is the supply rises have our supply rise otee hi to sks make a high-dose supply curve above another ko jayega shift k kankare ga escaraded shift word right shift to right he be right kita raf shift ho jaega and Joe mara Joe prices him with a grand gate fall Cringer other quantity a up he was Zada re here which is a mix is Zada re here okay to sks make a happy here per honey let's say that the demand is same. If your supply is more, then in that case, your quantity will increase, but your price will fall. Prices will fall because it will be excess in the market. But quantity increases. And oppositely, if your supply falls, then in that case, the supply curve will shift to the left. Supply will, supply curve will shift to left. Okay, now if it shifts to the left, then what will happen? Your prices will be, now supply will be less, the supply will be less. So when the supply is less, but the demand is the same, when the demand is the same, then supply is less, then what will the prices do? They will rise. Prices will increase. Prices increase. Okay, and our quantity, what is it doing? Decrease. Because supply is decreasing, so what is the quantity? It is decreasing. So this is all about demand and supply.