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DEMAND, SUPPLY & MARKET EQUILIBRIUM (I) Cheat Sheet (DRAFT) by

all about demand I should know

This is a draft cheat sheet. It is a work in progress and is not finished yet.

All about Demand

Demand
the quantity of a good or service that consumers are willing and able to purchase at a given price in a particular time period

Law of demand
Price goes down, quantity demanded increases.
Price goes up, quantity demanded decreases.
(vise versa)

Factors that affect demand

1. Price of related goods
2. Price of other goods
- replac­ement goods (brg pengganti)
- comple­mentary goods (brg penggenap)
3. Income
4. Tastes /Prefe­rences
5. Number of Consumers
6. Expect­ations

Why is the demand curve downward sloping?

Subsit­ution Effect of goods
Changes in price motivate consumers to buy cheaper substitute products
Income Effect
When price goes down, people buy more of a product because their purchasing power has increased; vice versa.
Law of Dimini sihing Marginal Utility
As you continue to consume a given product, you will have less satisf action the more you have.

Explan­ation

barang pengganti
dua barang yang boleh saling menganti kerana fungsinya yang sama. cth: margerin dan mentega
comple­mentary goods (barang penggenap)
dua barang yang perlu digunakan bersama. cth: kereta dan petrol
Income (penda­patan pengguna)
Y increases, consumer purchasing power increases and demand also increases
 

Differ­entiate between

Change in quantity demanded
Change in demand
happen because of: the price of the item itself
happen because of another factor other than factor the price of the item itself
 
a) Price changes of other goods
 
b) Income
 
c) Tastes and Prefer­ences
 
d) Number of Consumers
 
e) Future Expect­ation

Table

Price (RM)
quantity demanded (units)
1
10
2
8
3
6
4
4
5
2

Demand curve

There is a negative relati­onship between price and quantity demanded.

if the price increases (RM3 to RM4), the quantity demanded decreases (6 units to 4 units)
if the price decreases (RM3 to RM2), the quantity demanded increases (6 units to 8 units)
  

Calculate equation of demand

Qd = a - bP
Qd = quantity of demand for goods X
P = price of goods x
a = intercept (pintasan pada paksi)
b = the slope of the demand curve (negative) kecerunan

if
P = RM1, Qd = 10units
P = RM2, Qd = 8units

then:
10 = a - 1b (equation 1)
8 = a - 2b (equation 2)

Step 1
find value b
b = #Q / #P
# = big digit - small digit *

b = (10-8)/ (2-1)
b = 2/1
b = 2

Step 2
find value a
Qd = a - bP
10 = a - 1b
10 = a - 1(2)
10 = a - 2
10 + 2 = a
a = 12

demand equation = Qd = 12 - 2P