surely all praise is for Allah. We praise Him and seek his help. We seek his forgiveness and we seek refuge in Him from the evil of our own souls and from the wickedness of our deeds. Whomever He guides shall never go astray, and whomever He allows to astray shall never find guidance. I bear witness that none has a right to be worshiped but Allah alone, who has no partner, and I bear witness that Muhammad is His slave and His last and final messenger. May, mercy and blessing of Allah be upon Him and upon His family and His companions and upon those who follow them in piety until the Day of Judgment inshallah ameen.
What is Demand? This is defined as the number of goods that is requested by a particular buyer at each price or the agreeable price and having the power or means to pay for it. Or in order words Demand is the number of goods that a buyer is willing to pay for and has the ability for to pay it at a giving price.
In economics what is considered a demand is when a buyer has a desire to buyer a particular good or service and that purchase is backed by his or her purchasing power. Therefore a consumer who desires to buy a particular good or service but he or she is constrained by his or her income is not considered a demand. A market demand can be arrived at by summing all individual demands in the market. In order for us to make a graphical representation or illustration we need a curve called a DEMAND CURVE. A demand curve is a line that shows the relationship between the quantity demanded of a good and service and there prices. Economic tells us that the quantity demanded of a good and service and there prices are negatively related that is the higher the price of goods the lower the quantity demanded of that good. This relationship is evident in our real life situation because a customer will always bargain for a lower price of a good. Also, an individual, given his or her income, tends to demand more of a good when the price is lower and less of a good when the price is higher. This graph below shows that as the price decrease then the Quantity Demand increases.
{Graph area 1}
Supply: in economics, supply is the amount of goods and services that a producer is willing to offer at the market at a specific price.
The relationship between supply and the price is positive because the higher the higher price of a good at the market, the more goods and services producers are willing to offer because there lays a profit opportunity. Hence, we have an upward sloping supply curve. This is evident in real life because producers always offer goods at the market when there are higher prices. The market supply is obtained by summing the individual supplies. Supply curve is line that shows the relationship between quantity supply of goods and its price.
Graph
2
Relation between demand and supply in our earliest discussion on demand we stated that demand is negatively related to price and is downward sloping. Supply in the other hand has positive relationship with price and is upward sloping. From this explanation its evident that supply and demand are two opposite concepts because we stated earlier that demand has negative relationship with price and supply has positive relationship with price. Also in market when there is high quantity demanded of a good it means lesser price for that good prevails in the market and therefore we have lesser supply.
THE SHIFTERS OF A supply; before we talk about the shifters of a supply we need to clarify one thing if the change in supply increases supply, you will see the supply curve shift to the right, while a decrease in supply will shift the supply curve to the left. The shifters of supply are those factors that increase or decrease supply. They are also called supply shocks. The following are some of the shifters of supply:
1 cost of production
2 technologies
3 number of producers
Cost of production: in production firms incur costs such as labour cost, material cost and capital. These costs if sum together gives the firms cost of production. Cost of production involves all the expenditures that a firm incurs in producing its output. Therefore, when a firm’s cost of production increases, they tend to supply less of goods because given their capital, they can produce less of a good when the cost of production increases. Some of the things that make up the cost of production are such cost of buying raw materials, paying employees’ wages and salaries, the price of oil. In a country where there is an influential labour union, they tend to push up wages because they have that bargaining power to influence the labour market and thereby causing wage hikes. A wage hike, an increase in the price of raw material and an increase in the price of oil, increase the cost of production and thereby reducing supply and that reduction in supply shifts the supply curve left ward. So in the Gambia we have no labour unions to influence wages. So decrease in supply will hardly be attributable to increases in wages.
Technologies: technical progress or technological advancement is the improvement in a country’s level of technology. According to the Cobb-Douglas production function, the output of an economy depends on the level of technology, the labour and capital. Output and technology are positively related according to Cobb-Douglas production function. The higher a country’s level of technology, the more output it is expected to produce. So this positive relationship between technology and output makes it possible for countries with a high level of technology to produce more output. Consequently, higher output leads to higher supply in an economy. Therefore, higher levels of technologies lead to higher supply in an economy which in turn shifts the supply curve outward.
The graph showing an advancement in technology:
Number of producers: the number of producers is the number of people who gather resources such as labour, capital and land to produce goods and services. In an industry, when the number of producers of particular good increases, then the production of that particular good increases as well. Again when the production of goods and services increase, the amount of goods and services that the producers are willing to offer at the market at a given prices (supply) increases as well. Given a greater number of producers in the market, the supply of the good and services the producers offer increases hence the supply curves shifts outward. The opposite of the above analysis is true when the number of producers diminishes.
Graph showing number of producers:
Bibliography
Chapter
3H-Supply and demand pdf
Chapter 5 section 3.pdf
Economics 100 class 4.pdf
Economics .pdf
PTLect2y.pdf
C:\Users\user\Desktop\Summary of a Workshop on U.S. Natural Gas Demand Supply, and Technology ... - Committee on U.S. Natural Gas Demand and Supp.htm
Economics Supply and Demand, joseph Whelan kamil
mefer January 14, 1996
Arab British Academy for higher Education. Page.1, 2,
3
Demand and supply published in Inside the Vault, Volume 12, Issue 2, Fall 07
Website at www.cengage.com/economics/mankiw.
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