Demand And Supply SS2 Economics Lesson Note

CHANGE IN QUANTITY DEMANDED

A change in quantity demanded is otherwise known as movement along a particular demand curve that is only influenced by price. When there is a change in the quantity demanded, the demand curve does not shift. This is because the price of the commodity is the only cause of a change in the quantity demanded while other factors remain unchanged.  

From the above diagram, as the price falls,  the quantity demanded increases.

Hence movement along the same demand curve took place.

Further decreases or increases in price will also affect the movement along the same demand curve.

CHANGES IN DEMAND

When different quantities of goods and services are demanded at a particular price, it is called a change in demand. It is caused by those factors that generally affect the demand for a commodity other than the price of the commodity; For example changes in taste and fashion, changes in income etc.

Change in demand shows a shift of the demand curve to an entirely new position. A shift of the demand curve to the right is termed an increase in demand while a shift of the demand curve to the left is a decrease in demand.

CHANGES IN QUANTITY SUPPLIED

Change in quantity supplied is only influenced by price. It involves movement along the same supply curve

CHANGE IN SUPPLY 

Change in supply is caused by factors other than the price of the commodity. It involves a bodily shift of the supply curve either to the right (increase in supply) or to the left

EFFECTS OF CHANGES IN DEMAND AND SUPPLY ON EQUILIBRIUM PRICE AND QUANTITY 

Changes in demand and supply lead to a change in the equilibrium price. Once there is any change in either demand or supply, the initial equilibrium will be disrupted and a new equilibrium will be created. The market equilibrium price can be affected in the following ways.

1. Increase in demand 

Effects of the increase in demand include:

• Increase in the equilibrium price from P1 to P2 
• Increase in the equilibrium quantity from Q1 to Q2

2. Decrease in demand 

Effects of Decrease in Demand include:

• Decrease in the equilibrium price from P1 to P2 
• Decrease in the equilibrium quantity from Q1 to Q2

3. Increase in supply

Effects of Increase in Supply include:

• Decrease in the equilibrium price from P1 to P2 
• Increase in the equilibrium quantity from Q1 to Q2

4. Decrease in supply

Effects of Decrease in Supply include:

• Increase in the equilibrium price from P1 to P2 
• Decrease in the equilibrium quantity from Q1 to Q2