Individual Demand and Market Demand for Student Typing

- When considering the impact of price on demand for a certain good or service, one must assume that other factors remain constant.

- There is a distinction between need and demand for a certain good or service.

Needs are the unlimited desires and wishes of people in consuming products and in daily activities. If the need is met , it becomes the demand of the market. Scarcity makes most needs unsatisfied. It is an objective demand that arises in each person, regardless of the ability to satisfy them, because human needs are unlimited while demand is limited and demand depends on the ability to pay of people.

For example: In your class, there are many friends who go to school by motorbike, you also wish you had a nice scooter to go to school - that is your need, it has nothing to do with whether you can buy it or not,

- The relationship between demand and need

In a market economy, economic relations take place on the basis of income, not on the basis of demand. Income is the source of demand. It also represents people's desire for specific goods; but this desire is limited in its ability to be realized, so demand must come from need or we can say that demand is a need with the ability to pay and this ability to pay is based on income.

For example: Your monthly income is 800,000 VND (assuming that: daily living expenses do not change, savings are considered zero), this month you want to buy a TV for relaxation with an amount of 2 million VND. We see, your income is very small compared to the amount of money to buy a TV, so your need cannot be fulfilled (the ability to do so does not exist). But if this month you receive a large amount of money from a relative, 4 million VND, at this time you are ready to buy a TV and therefore, your wish has been fulfilled. Thus, we can say that demand is a need with the ability to pay and this ability to pay is based on income.

2.1.1.2. Quantity demanded

Quantity demanded is the quantity of goods and services that buyers are willing to buy at a given price during a given period of time.

For example: If the price of oranges is 8,000 VND/kg, your demand is 2kg. When the price increases to 10,000 VND/kg, your demand is 1kg.

Thus, quantity demanded is determined at a price and demand is the sum of quantity demanded at all prices.

The quantity demanded for a good or service may be greater than the quantity actually sold. Because the quantity willing to buy depends only on preferences and ability to pay.

of the buyer. The actual quantity purchased depends on the preferences and capabilities of both the seller and the buyer. To clarify this issue, let's take a specific example:

For example: To attract customers, every month a CD store has a promotion on the first day of each month, selling 40 music discs at a promotional price of 4,000 VND /disc. At that price, consumers want and are willing to buy 50 CDs, but because the store only sells 40 CDs at that price, consumers can only buy 40 CDs. So the demand is 50 CDs, which is the amount that consumers want to buy, but in reality the store only sells 40 CDs, because the actual quantity purchased depends on the preferences and abilities of both consumers.

buyers and sellers of CDs, so the quantity demanded is now greater than the quantity actually sold.

2.1.1.3. Demand schedule

A demand schedule is a table that shows the relationship between the quantities of a good that buyers are willing and able to buy at different prices over a given period of time (other things being equal).

For example: The demand schedule for ice cream of student A is as follows:

Table 2.1: Ice cream demand schedule of student A

Ice cream price (VND/cup) (P)

Quantity demanded (cups) (Q)
3,000	10
3,500	8
4,000	6
4,500	4
5,000	2

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This table shows how student A’s behavior will change when the market price of ice cream changes. If the price of ice cream is as low as 500 VND/cup, student A can eat 10 cups, but if the price is higher than 2,500 VND/cup, student A eats less ice cream and can only eat 2 cups. Therefore, demand exists only if someone is willing and able to pay for ice cream. For student A, this depends on two factors: the amount of money student A has and the market price of ice cream.

2.1.1.4. Demand curve

When the demand curve is represented on a graph (the vertical axis is price and the horizontal axis is quantity), this line is called a demand curve.

The demand curve is a curve that describes the relationship between the quantities of a good that consumers are able and willing to buy at different prices when other factors remain unchanged.

When showing the relationship between price and quantity demanded on a graph, the curve

demand will have a downward sloping form (the common form); in addition, there are also other trends of the demand curve which are special cases when the demand curve no longer has a downward sloping tendency - to the right.

a. Common case of demand curve

A downward sloping demand curve shows that when the price of a good increases, other factors remaining unchanged, customers tend to buy less of the good, and vice versa.

P 0 P 1

P 2

Q 1

Q 2

Q 0

Figure 2.1: Downward sloping demand curve

There are two main reasons why the demand curve slopes downward:

- First, there is the substitution effect. When the price of a good increases, consumers will replace it with another similar good.

For example, when the price of pork increases, consumers will likely buy more chicken.

- Second, there is the income effect. This happens because when prices go up, consumers find themselves poorer than before. So, consumers automatically cut back on their consumption of that good.

For example, if the price of gasoline doubles, real income will decrease even though nominal income remains unchanged (the amount of salary received does not decrease), so consumers will automatically cut back on gasoline consumption.

b. Special cases of demand curve

Special cases of the demand curve are those cases where the demand curve, when represented on a graph, no longer obeys the downward sloping demand curve rule.

- Upward sloping demand curve: this is an exceptional case that occurs in a very short period of time (inflation, currency exchange). This state shows a proportional relationship between price and quantity demanded; price increases but consumers still buy more (quantity demanded increases).

P 2

P 1

0 Q 1 Q 2 Q

Figure 2.2: Upward sloping demand curve

- Vertical demand curve (parallel to the vertical axis): this is the case where no matter how much the price increases, the consumer demand for that type of good or service remains unchanged (Q 1 ) - for example, table salt.

P 2

P 1

0 Q 1 Q

Figure 2.3: Vertical demand curve

- The demand curve is horizontal (parallel to the x-axis), this is the case showing that when the same price (P 1 ) consumers will buy with any quantity. Like the 2 special cases above, this case also only occurs in a very short period of time.

P 1

0 Q 1 Q 2

Figure 2.4: Horizontal demand curve

2.1.2. Individual demand and market demand

- Individual demand: the demand of each consumer for a certain type of goods or services is individual demand.

- Market demand: Market demand for a good or service is the sum of all individual demands for that good or service. Market demand is the sum of all demands from all buyers.

For example, assuming other factors remain unchanged, students have two choices for their thesis, either to hire a typist or to write it themselves. We have the following demand schedule:

Table 2.2: Individual demand and market demand for student typing services

Price for typing 1 page

(copper)

Demand (page number)				Total demand
Student A	Student B	Student C	Student D	Total demand
500	1	4	0	0	5
450	2	6	0	0	8
400	3	8	0	0	11
350	5	11	0	0	16
300	7	14	1	0	22
250	9	18	3	0	30
200	12	22	5	0	39
150	15	26	6	0	47
100	20	30	7	0	57

Based on the principle of calculating market demand from the sum of individual demands; we will construct the market demand of a certain commodity with only 2 individuals existing in the market, the result of constructing the market demand curve through the following graph:

D 2

D 1

D TT

P 1

0 Q 1 Q

Figure 2.5: Market demand curve

In theory, we can establish the market demand curve (D TT ) by horizontally adding the two individual demand curves D 1 and D 2 . When Q ≤ Q 1 , the market demand curve is the demand curve D2, when Q > Q 1 , the market demand curve is the sum of the demands of the two individuals participating in the market. Therefore, the market demand curve in the above case is the "shaded" line (broken at point A equivalent to the price P 1 and the quantity demanded is Q 1 ).

2.1.3. Law of demand

Demand curves have one thing in common: they slope downward to the right, indicating an inverse relationship between the price of a good and the quantity demanded. This inverse relationship is reflected in the law of demand.

When the price of a good increases, the quantity demanded of that good or service decreases and vice versa, provided that other factors affecting demand remain constant.

Note: In reality, there are some special types of goods that do not obey the law of demand, we call them exceptions to the law of demand.

For example: Fashionable goods; high price means high demand, when the fashion is over, price decreases, demand decreases (due to consumer preferences and income).

Electric fans sold in winter and winter clothes sold in summer are completely similar cases.

Luxury goods: High price consumers buy more (high-end perfume).

2.1.4. Factors affecting bridge formation

We can see: what determines the market demand for a certain type of goods? A number of factors influence the quantity demanded at any given price: income, population, price and availability of related goods, tastes and other specific factors. To know these factors, let's look at each specific factor:

- Price of the purchased goods themselves (P X )

According to the law of demand: When the price of a good increases, the quantity demanded for that good decreases and vice versa.

Back to the student's ice cream example. When the price of ice cream increased, student A bought less ice cream; when the price of ice cream was 500 VND, the demand was 10 cups, but when the price of ice cream increased to 2500 VND, the demand was only 2 cups. It can be said that when the price changes, the quantity demanded will change. Therefore, price is the factor that determines the quantity demanded.

- Consumer income (I)

Income is one of the most important factors that determine what and how much consumers can buy. Therefore, income is a fundamental factor in determining demand. Based on the relationship between income and demand for goods and services, German statistician Ernst Engel divided the types of goods demanded according to income as follows:

+ For most goods and services, when income increases, demand for them increases and when income decreases, demand for goods and services also decreases. These goods are considered normal goods. Normal goods include essential goods and luxury goods:

Necessities are goods that are demanded more when income increases but the increase in demand is relatively small or approximately the same as the increase in income.

For example: Goods such as food are considered essential goods. When your income increases, consumers not only buy enough quantity they need but also care about more quality, better taste, more beautiful but this increase in demand will not be greater than the increase in income. (If income increases 4 times, then surely the increase in beef will be less than the increase in your income).

Luxury goods are goods that are demanded relatively more when income increases.

For example: When income increases, people will have more demand for travel and insurance, increasing demand in these areas. If you are a student, this month in addition to the allowance from your family of 600,000 VND , with this amount you have to pay for things like food, books, dormitory... so you cannot think of a trip to visit somewhere. But because you tried hard to study, you received a scholarship of 180,000 VND , so with this extra income on the weekend you decided to travel to the mountain lake.

cup. Or for those with high incomes, they are willing to spend even thousands of dollars to travel or buy high-value insurance.

+ For some goods and services, when income increases, consumers buy less and vice versa, those goods are called inferior goods.

For example: Cassava, sweet potatoes, corn, many years ago when our country's economy was still facing many difficulties, corn, sweet potatoes, and cassava were essential goods. But with the increasingly developed life, today they are considered secondary goods, so when income increases, consumers will buy more meat, fish, and fruit and buy less cassava and sweet potatoes.

- Prices of related goods (P Y )

Goods that have some relationship to the goods under consideration.

The prices of related goods also affect the consumer's purchasing decision. For every good there are two types of related goods: substitute goods and complementary goods:

+ Substitute goods are goods that can be used instead of other goods .

For example: The beverage market today has countless types of beverages such as beer, soft drinks, etc. If you don't drink beer, you will drink soft drinks, so beer and soft drinks are two substitute goods.

The question here is why do substitutes exist and how does this substitution affect demand? There are many reasons such as they perform the same function and the price of the substitute falls; if the price of the good in question rises, the demand for the substitute will increase.

Question: If the price of natural gas increases, will it increase or decrease the demand for gasoline? Since gasoline and natural gas are substitutes.

+ Complementary goods are goods used at the same time as other goods.

For example: A motorbike needs petrol to start, petrol and motorbike are used together so they are complementary goods.

So how do they affect demand? What happens when the price of motorbikes increases? We can see that the demand for gasoline will decrease, because according to the law of demand, when the price of motorbikes increases, the demand for motorbikes will decrease. Besides, motorbikes are one of the engines that run on gasoline, so when the number of motorbikes decreases, it will lead to a decrease in the amount of gasoline consumed.

So we can say: If A and B are two complementary goods, then when the price of good A increases, the demand for good B decreases and vice versa.

- Consumer tastes (T)

Taste is a person's liking or preference for goods and services. Taste determines the type of goods that consumers want to buy.

Tastes are difficult to observe, so economists often assume that tastes do not depend on the prices of goods and the income of consumers. Tastes depend on

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