CHAPTER 3:

Demand, Supply, and Price

TABLES AND FIGURES

 Table 3.1 Alice’s Demand Schedule

Quantity demanded
Reference Letter Price [£ per dozen]
[dozen per month]

a 0.50 7.0
b 1.00 5.0
c 1.50 3.5
d 2.00 2.5
e 2.50 1.5
f 3.00 1.0 Figure 3.1 Alice’s Demand Curve

Price of eggs [£ per dozen]

3.00 f
e
2.50
d
2.00
c
1.50
b
1.00
a
0.50

1 2 3 4 5 6 7

Quantity of Eggs [dozen per month]

 Figure 3.2 The Relation Between Individual and Market Demand Curves
Price of eggs [£ per dozen]

3.00

2.00

1.00
3.00

Price of eggs [£ per dozen]

2 4 6 8
Quantity of Eggs 2.00
[i]. William [dozen per month]

1.00
Price of eggs [£ per dozen]

3.00

2.00 2 4 6 8 10 12 14
Quantity of Eggs
[dozen per month]
1.00
[iii]. Total Demand William & Sarah
2 4 6 8
[ii]. Sarah Quantity of Eggs
[dozen per month]
 Table 3.2 A Market Demand Schedule for Eggs

Reference Letter Price [£ per dozen] Quantity demanded

[000 dozen per month]

a 0.50 110.0

b 1.00 90.0

c 1.50 77.5

d 2.00 67.5

e 2.50 62.5

f 3.00 60.0
 Figure 3.3 A Market Demand Curve for Eggs

3.50
D
Z
3.00
Price of eggs [£ per dozen]

Y
2.50

X
2.00

W
1.50

V
1.00

U
0.50

20 40 60 80 100 120 140

Quantity of Eggs
[thousand dozen per month]
 Figure 3.4 Two Demand Curves for Eggs

3.50
D0
3.00 Z

2.50 Y
Price of eggs [£ per dozen]

2.00 X

1.50 W

1.00 V

U
0.50

20 40 60 80 100 120 140

Quantity of Eggs
[thousand dozen per month]
 Figure 3.4 Two Demand Curves for Eggs

3.50 D1
D0
3.00 Z Z’

2.50 Y Y’
Price of eggs [£ per dozen]

2.00 X X’

1.50 W W’

V V’
1.00

U U’
0.50

20 40 60 80 100 120 140

Quantity of Eggs
[thousand dozen per month]
 Figure 3.5 Shifts in the Demand Curve

Price D0

0
Quantity
 Figure 3.5 Shifts in the Demand Curve
D1
Price D0

0
Quantity
 Figure 3.5 Shifts in the Demand Curve
D1
D0
D2
Price

0
Quantity
 Table 3.4 A Market Supply Schedule for for Eggs

Reference Letter Price [£ per dozen] Quantity demanded

[000 dozen per month]

0.50 5.0
u

1.00 46.0
v

1.50 77.5
w

x 2.00 100.0

y 2.50 115.0

z 3.00 122.5
 Figure 3.6 A Supply Curve For Eggs
3.50
S

Z
3.00

Y
2.50
Price of eggs [£ per dozen]

X
2.00

W
1.50

V
1.00

U
0.50

20 40 60 80 100 120 140

Quantity of Eggs[thousand dozen per month]
 Table 3.5 Two Alternative Market Supply Schedule for Eggs

Price of Eggs Original quantity New quantity

[£ per dozen] supplied [‘000 supplied [‘000
dozen per month] dozen per month]
[1] [2] [3] [4] [5]

u 0.50 5.0 28.0 U’

v 1.00 46.0 76.0 V’

w 1.50 77.5 102.0 W’

x 2.00 100.0 120.0 X’

y 2.50 115.0 132.0 Y’

z 3.00 122.5 140.0 Z’

 Figure 3.7 Two Supply Curves for Eggs

3.50
S0

Z
3.00

2.50 Y
Price of eggs [£ per dozen]

2.00 X

W
1.50

V
1.00
U

0.50

20 40 60 80 100 120 140

Quantity of Eggs [thousand dozen per month]

 Figure 3.7 Two Supply Curves for Eggs

3.50
S0
S1
Z
3.00

2.50 Y
Price of eggs [£ per dozen]

2.00 X

W
1.50

V
1.00
U

0.50

20 40 60 80 100 120 140

Quantity of Eggs [thousand dozen per month]

 Figure 3.8 Shifts in the Supply Curve

Price S0

Quantity
 Figure 3.8 Shifts in the Supply Curve

S0
S1
Price

Quantity
 Figure 3.8 Shifts in the Supply Curve

S2
Price S0

Quantity
 Figure 3.8 Shifts in the Supply Curve

S2
S0
S1
Price

Quantity
 Table 3.6 Demand and Supply Schedules for Eggs and Equilibrium Price

Price Quantity Quantity supplied Excess Demand [quantity

[£ per dozen] demanded [‘000 dozen demanded minus
[‘000 dozen per month] quantity supplied]
per month] [‘000 dozen per month]

0.50 110.0 5.0 105.0

1.00 90.0 46.0 44.0

1.50 77.5 77.5 0.0

2.00 67.5 100.0 -32.5

2.50 62.5 115.0 -52.5

3.00 60.0 122.5 -62.5

 Figure 3.9 Determination of the Equilibrium Price of Eggs

3.50
D
Z
3.00

Y
Price of eggs [£ per dozen]

2.50

X
2.00

1.50 W

V
1.00
U

0.50

20 40 60 80 100 120 140

Quantity of Eggs [thousand dozen per month]

 Figure 3.9 Determination of the Equilibrium Price of Eggs

3.50
D S

Z Z
3.00

Y Y
Price of eggs [£ per dozen]

2.50

X X
2.00

1.50 W W

V V
1.00
U U

0.50

20 40 60 80 100 120 140

Quantity of Eggs [thousand dozen per month]

 Figure 3.10 The ‘Laws’ of Demand and Supply

Price
S
Price

Quantity

[ii]. The effects of shifts in the supply curve

Quantity

[i]. The effects of shifts in the demand curve

 Figure 3.10 The ‘Laws’ of Demand and Supply S0

Price
E0
p0

S
D0
Price

q0 Quantity

[ii]. The effects of shifts in the supply curve

p0
E0

q0 Quantity

[i]. The effects of shifts in the demand curve

 Figure 3.10 The ‘Laws’ of Demand and Supply S0

D S1

Price
E0
p0 E1
p1
D1 S
D0
Price

q0 q1 Quantity

E1
[ii]. The effects of shifts in the supply curve
p1
p0
E0

q0 q1 Quantity

[i]. The effects of shifts in the demand curve