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Demand and Supply Relationship

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Demand and Supply Relationship
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Table of Contents 1.0 Introduction 2.0 Analysis 3.1 Demand and Law of Demand 3.2 Determinants 3.3.1 Demand 3.3.2 Supply 3.3 Elasticity 3.4.3 Determinants of Price Elasticity Demand 3.4.4 Determinants of Price Elasticity Supply 3.4.5 Price Elasticity of Demand 3.4.6 Income Elasticity of demand 3.0 Conclusion 4.0 Reference List

1.0 Introduction
This is a good perceptive article written by B.K. SIDHU, titled “Digi entry in mid-year may spark iphone price war” and was posted on 2 March 2010. It discussed about the launching of iphone by Digi. Com Bhd., the Malaysian mobile phone company which was controlled by Norway’s Telenor and the price war on service and packages in the smartphone market. Digi thinks they will increase sales more than 5% this year because of the demand of iphone had been increasing.

This assignment will focus on the demand and supply of the iphone and the determinant of the demand and supply will be further explored. Furthermore, this assignment aims to analyze the price elasticity of iphone.

2.0 Analysis 3.1 Demand and Law of Demand
Demand indicates the quantity of goods that the consumer is willing and able to buy at a given price during a particular period of time.
Consumer refers to individual or household. Individual demand refers to a particular person, whereas market demand and total demand refer to the whole market consumer.

Holding everything else constant, suppose the initial price is P0, the initial quantity is Q0, when Digi enters the iphone market, there is an increase in supply which switch the supply curve from S1 to S2. The price of the service and package will decrease to P1, causing the quantity to increase to Q1. The law of demand states that: “Holding everything else constant, an increase in price
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