Demand and Supply Study Guide
INTERNATIONAL BACCALAUREATE
ECONOMICS GRADE 11
SECTION 1: MICROECONOMICS
Required Readings:
Economics Course Companion, Blink and Dorton Chapter 2, P 18
Economics for the IB Diploma, IB Skills and Practice P9 Section 1.1
Economics for the IB Diploma, Ellie Tragakes P32 Section 2.2
Demand and Supply
The purpose of this section is to identify and explain the importance of markets and the role played by demand and supply. The roles played by consumers, producers and the government in different market structures are highlighted. The failures of a market system are identified and possible solutions are examined.
Note: The concepts learned here have links with other areas of the syllabus. For example, elasticity has many applications in different areas of international trade and development.
1. DEMAND ANALYSIS
1. Demand is the quantity of goods and services that the consumers willing and able to purchase at all possible price in a given time of period.
2. The law of demand is ‘as the price of a product falls, the quantity demanded for the product will usually increase, ceteris paribus.’
a. Shows a relationship between price and the quantity demanded for a product
b. Follows term ceteris paribus (all other things being equal) in the graph bellow, the only changing determinant is the price, assuming that all the non price determinants of demand to be unchanged
In the figure above, as the price of the product falls, the quantity demanded of the product increases.
3. The non-price determinants of demand.
a. Income change in income affects 2 types of goods
b. Normal goods: most goods that if the income rises, their demand will rise as well
I. As income rises the demand curve will shift to the right and the size of the shift depend on the good itself.
I.
II. Inferior goods: if a product is considered inferior, as the income increases, the quantity demanded for the product will fall, as people
ECONOMICS GRADE 11
SECTION 1: MICROECONOMICS
Required Readings:
Economics Course Companion, Blink and Dorton Chapter 2, P 18
Economics for the IB Diploma, IB Skills and Practice P9 Section 1.1
Economics for the IB Diploma, Ellie Tragakes P32 Section 2.2
Demand and Supply
The purpose of this section is to identify and explain the importance of markets and the role played by demand and supply. The roles played by consumers, producers and the government in different market structures are highlighted. The failures of a market system are identified and possible solutions are examined.
Note: The concepts learned here have links with other areas of the syllabus. For example, elasticity has many applications in different areas of international trade and development.
1. DEMAND ANALYSIS
1. Demand is the quantity of goods and services that the consumers willing and able to purchase at all possible price in a given time of period.
2. The law of demand is ‘as the price of a product falls, the quantity demanded for the product will usually increase, ceteris paribus.’
a. Shows a relationship between price and the quantity demanded for a product
b. Follows term ceteris paribus (all other things being equal) in the graph bellow, the only changing determinant is the price, assuming that all the non price determinants of demand to be unchanged
In the figure above, as the price of the product falls, the quantity demanded of the product increases.
3. The non-price determinants of demand.
a. Income change in income affects 2 types of goods
b. Normal goods: most goods that if the income rises, their demand will rise as well
I. As income rises the demand curve will shift to the right and the size of the shift depend on the good itself.
I.
II. Inferior goods: if a product is considered inferior, as the income increases, the quantity demanded for the product will fall, as people