Demand Curve and Supply Curve

Alright, let’s keep this thing rolling.

First up — supply and demand analysis!!!!

This is something every~~~one already knows cold, so I’m gonna breeze through it a bit haha heh heh.

OK so first, let’s draw the demand curve, shall we?!?!

Done??? haha

Aw c’mon, this is still my major after all….

Let me think for a sec about what principle actually produces that shape.

(I’ll use the red ginseng extract I’ve been religiously chugging every day lately as our market.)

So let’s say there are a crazy lot of people here.

Like this.

And you go up to every single one of these people and ask!!!!!

“Yo human!!!!! How much would you pay for some red ginseng?!?!?!?!”

And each person’ll have their own personal limit, like this.

Now I’m gonna line all those folks up in a single row — and how am I lining them up, you ask?

Like this.

hahaha well, hahaha and since we’re just gonna draw a graph anyway, let’s go ahead and count the humans.

4 people / 4 people + 10 people / 4 people + 10 people + 12 people / …..

Yeah, something like that.

Now let’s slap a coordinate axis on top and plot it.

With the axes drawn like this, the way we’ll mark points is:

“When the price is p, how many units of red ginseng will sell?!?!?!!!!! Right, this many will sell!!!!”

That’s the kind of marking we’re doing.

Now if we treat $P$ as a continuous variable and imagine marking a point for every~~~single price, those continuous points will look to our eyes like a line, and that line will look like this.

I also baked in the idea that… the cheaper it gets, the faster the number of would-be buyers grows.!!!!!

Now now now now now,

I’m pretty sure you now have a crystal-clear sense of why the demand curve is drawn the way I just tossed at you up top.

heh heh heh heh heh

The reason I derived it in this roundabout way is for 2 reasons.

And we can also say the “law of demand” is sitting right there in that graph.

Let me run through it.

Law of demand: holding every other factor that affects demand fixed, there’s an inverse relationship between price and quantity demanded.

One more thing,

apparently you can also classify the demand baked into the demand curve.

Finer classification comes later — for now, broadly~~~, two flavors: direct demand and derived demand.

Direct demand is, just like it says on the tin, demand for the good itself,

and derived demand is demand that comes from the production or sale of other goods —

for example, the demand for sugar contains within it the demand for cola… that kind of thing.

Even if literally no one wants more sugar, if a ton of people want cola, the demand for sugar has got to go up by some amount — that’s the deal!!!!

Obvious stuff, but the point is: inside the demand curve, all~~~the demand across an entire nation is mashed together to give us the demand for “one market.” heh heh heh

OK that wraps the basic demand talk,

and now I’m gonna get into the basics of supply,

but honestly… isn’t the supply talk basically already done????

When am I gonna draw all of that out again??????

Let me recycle what there is to recycle and derive the supply curve nice and kindly too;;

First, let’s say there are a bunch of suppliers as well.

And we ask each one of these supplier folks, one by one!!!!

Yo~~~~~ how much you gonna sell it for???? >_<???

Lining ’em up in a single row again;

And we drop the same coordinate axes on top as before.

I’ll just make the next figure the one with all the points already plotted.

For the supply curve too, the $Q$ value means the cumulative quantity,

and you can also spot the difference between a curve that bakes in the “rate keeps getting larger” idea and one that doesn’t….

Eh, it’s all the exact same context as the demand curve, so I’ll skip the play-by-play.

OK, on to the next thing.

Originally written in Korean on my Naver blog (2016-07). Translated to English for gdpark.blog.