Chapter 2:

◆Demand and
Supply◆

P
S

Pe
Q

0 Qe

「需求定律是經濟學的靈魂，其重要性是不能誇大的。任何經濟學論

著，有道之士可單看作者對這定律的操縱就知道作者的斤兩如何。 」

張五常
◆Section 1, Quantity demanded and Demand◆
◆How is PRICE determined? ◆
We have already learned in Chapter 1 that price helps a market economy tackle the
three basic economic problems. However, what is price? How is price determined? In
the chapter, we are going to answer these questions.

Basically, in a market economy, price is determined by the interaction of two market

forces –Demand and Supply.

◆What is Price? ◆
Price is the exchange value of good
1. Relative Price—is the price expressed in terms of other goods.

=
2. Nominal Price—is the price expressed in terms of money.

= $300
◆What is Demand 需求 ? ◆

Demand—refers to the quantities of a good that a consumer (or buyer) is willing

and able to buy at different prices, over a certain period of time, ceteris paribus (i.e.,
other things being constant).

 願意 willing & 有能力 able

 Demand 並非實際在市場上的購買數量,因為還須視乎該商品的真正售價
 Demand 與 wants 不同
 Wants+ Purchasing power= Demand

Want
s
+ $$$
= Demand
◆What is Quantity Demanded 需求量 ? ◆

Quantity Demanded—the quantities of a product that you are willing and able to
buy at a given price

◆ Demand vs. Quantity demanded ◆

在指定價格範圍下… Vs. 在一指定價格下…

Candy’s Demand Schedule for 可樂

Price ($) Quantity Demanded (cans)
$1
$2
$3
$4

◆Law of Demand 需求定律 : ◆

As the price of a product rises the quantity demanded decreases and vice versa,
ceteris paribus

價格與需求量成反向關係
需求定律反映了一般消費者的 consumption behavior

P
 Q

0 可樂
Demand curve:
A curve showing the relationship between price and quantity demanded of a product
 一般 demand curve 都是由左至右向下傾斜(downward sloping)
 每條 demand curve 只可反映一項 good or service 的價格與需求量的關係

Types of demand curve

 Individual demand curve
 Market demand curve

Individual demand curve:

A demand curve of a product by an individual
P P

Q Q

D D

0 A 對電結他的需求 0 B 對電結他的需求

Market Demand:
The total demand for a product by an consumers in a particular market.

Demand Schedule for 電結他

Price A’s QD B’s QD Market’s QD
$8000 0 0
$4000 1 0
$2000 2 1
$0 3 2

假設電結他只有 A 和 B 兩人
P P P

Q Q Q

D D

0 A 對電結他的需求 0 B 對電結他的需求 0 市場對電結他的需求

點解要橫向相加 (Horizontal summation)?

消費者行為的變化分為兩大類 :
 Change in quantity demanded
 Change in demand

◆Change in Quantity demanded◆

The change in the quantity demanded which is a result of a change in the price of
that product itself

如果 good X 減價 ……
P Good X P△→Q D
△
  Good X 本身價格下降引至 QD
減少,沿著 demand curve 移動
 Demand curve 沒有移動
P1

Q
P2

D
Q1 Q2

如果 good X 加價……
P

 Good X 本身價格上升引至 QD
增加,沿著 demand curve 移動
 Demand curve 沒有移動
Q

0 Good X

師奶話齋 : 平 d 買多 ,貴 d 買少

結論 :若消費行為受內在因素(inside factor,例如 price)影響,需求曲線只會點對點

移動(move from point to point), 需求曲線不會移動.

◆Change in Demand◆

Change in demand results from changes in factors (outside factors) other than the
price of the produce itself.
1.假設 Candy 窮盡佢所有實則收入(i.e.,$1000)去買”死亡筆記薄”
Price QD P
$10 100
$20 50
$30 33
$40 25
$50 20
Q
0

2.假設 Candy 的工資由$1000 加至$2000 P

Price QD
$10 200
$20 100
$30 67
$40 50
$50 40
Q
視覺 效果 : 0

 ”死亡筆記薄”本身價格沒有改
變
 模型外的因素影響 Demand
Q
curve
 Demand curve 整條向右移動

0 死亡筆記薄

結論 :若消費行為受外在因素(outside factor,例如 real income)影響,需求曲線便

會整條移動

◆Reason for Change in Quantity demanded◆

 Change in price

◆Reason for Change in demanded◆

 Population,
 Taste and Fashion Season,
 Price expectation,
 Season,
 Real income(superior goods or inferior goods),
 Price of other commodities(complements or substitutes),
 Derived demand…………….etc.

Change in demand 的原因多到喊,總之記住:

一切模型外的變數 ,郁 demand curve

Further discussion on about….

I. Real income(superior goods or inferior goods)

An increase or a decrease in income will change the purchasing power of consumers,
and thus leads to a change in consumers’ plan of purchase. However, whether the
demand for a good will increase or decrease depends on whether the good is a normal
good or an inferior good

(a) ◆Normal goods(superior goods)正常物品 /優等物品 ◆

A normal good is a good which consumers will consume more when their real
income increases, and vice versa.

E.g. NDS, Traveling, Luxury watch Yr

↑→D ↑;
P P Yr ↓→D ↓
 Q Q

0 Normal good 0 Normal good

Increase in real income Decrease in real income

(b) ◆Inferior goods 劣等物品 ◆

An inferior good is a good which consumers will consume less when their real
income increases and vice versa.

E.g. Orange, bread, MK clothing

Yr
↑→D ↓;
P P
Yr ↓→D ↑

Q Q

0 Inferior good 0 Inferior good

Increase in real income Decrease in real income

II. Price of other commodities(complements or substitutes)

When the prices of other goods change, the demand for a certain good may also be
affected.

(a) ◆Substitutes 代替品 ◆

Two goods are said to be substitutes of each other or in competitive demand(競爭性

需求) if they can replace each other to satisfy the same want. When the price of one
good increases, an increase in demand for another good will be resulted, and vice
versa.

E.g. Pork and beef, Different brands of milk, 顏福偉演唱會 and W-INDS 演唱會
P P
The nature of
two goods is
fairly closed to
each other.
Q Q

0 顏福偉演唱會 0 W-INDS 演唱會

Decrease in price of the tickets Demand decrease

(b) ◆Complements 輔助品 ◆

Two goods are said to be complements to each other or in joint demand when they
are used together to satisfy a want. When the price of one good increase, the
demand for another good will decrease, and vice versa.

E.g. Ink and pen, DVDs and DVD players, Cars and gasoline
P P 一齊用才能滿
足 wants 的物
品

Q Q

0 Computers 0 Screen
Decrease in price of computer Demand increase

III. ◆Derived Demand 引申需求 ◆

The change in demand for a good may cause a change in demand for the factors of
production (resource) that are used to produce the good.

E.g. cars and steel, Property and land, Cloth and cotton

生產資源
The demand for the factor of production is a derived demand of the product. (factor of
P P production) 與
goods and
services 之間
的 demand

Q Q

0 Cars 0 Steel
Demand increase Demand increase

◆Exercises◆

A. Structured Questions
Answer the following questions. You are allowed to answer the following questions
with the aid of diagrams.

Q.1 Which statement is logically correct?

A. “At $4 per bottle, my demand for milk is three bottles per week.”
B. “At $2.5 per bottle, my quantity demanded for milk is six bottles per week.”

Q.2 Crazy sales of sportswear of a famous fashion shop increased its sales of
sportswear by 200%in quantity per week.
Explain this situation in terms of the economic principle you have learned.
Q.3 When the price of orange increases from $3 to $5, the quantity demanded
decreases from 400 to 200 pieces per month.
A. Sketch the demand curve for oranges.
B. Does the demand for orange obey the law of demand?

Q.4 When the price of a CD increases from $100 to $200, the quantity transacted
decreases. State whether it is a change in demand or a change in quantity
demanded. Explain

Q.5 What would happen to the demanded for Discmans when

A. the price of CDs decreases?
B. the price of MP4 decreases?

Q.6 Mrs. Chan told the hawker,”As the price of potatoes per kg increases, please just
give me one kg instead of two.”
Explain the behavior of Mrs. Chan I terms of an Economics principle.

B. Multiple – choice Questions

Choose the BEST answer

CE 1999-5
In which of the following pairs does the demand for the first good creates a derived
demand for the second?
A. Digital versatile disc(DVD) and laser disc(LD) player
B. Wool and mutton
C. Hardback hook and printing paper
D. Electricity and light bulb

CE 2000-9
Which of the following is an example of joint demand?
A. The courier service(送遞文件服務)of a local firm and the postal service of the
 government
B. The Airport Express train service and the Tung Chung Line train service
C. Magazines and printing paper
D. Floppy diskettes and floppy drives

CE2000-5
It became more difficult to find a metered car parking space by the roadsides after the
fee for a parking space was reduced from$4 to $2 for every7 15 minutes. It was also
reported that the fee in a car park remained at $15 per hour,

Which of the following about the effect on metered car parking by the roadside is
correct?
A. It can be explained by the law of demand.
B. It is an increase in demand.
C. The equilibrium quantity decreases.
D. The demand is elastic.

CE 2002-7
Refer to the following diagram:
Cross Harbor Bus Services
P

D1

D2
Q

No. of passenger rides

Which of the following would lead to the above change in demand from D1 to D2?
A. An increase in the toll fee for taxis using the cross harbor tunnels
B. An increase in the frequency of cross harbor bus services
C. A fall in the wage rate of bus drivers
D. A fall in the ticket price for Mass Transit Railway services