Demand

Made for ISC level

1. Demand and Law of demand

2. MEANING OF DEMAND

3. Types of Demand Individual Demand and Market Demand Ex-ante and Ex-post Demand Joint Demand Derived Demand Composite Demand / Rival Demand

4. Individual Demand vs Market Demand

5. Determinants of demand Price of the commodity 1 Income of the consumer ( i) normal goods, (ii) inferior goods, (iii) inexpensive necessities of life.) 2 Consumers' tastes and preferences 3 Prices of related goods ( (i) substitute or competitive goods and (ii) complementary goods.) 4 Consumers' expectations 5 Consumer-credit facility 6 Size and composition of population 7 Distribution of income 8 Government policy 9

6. Income of the consumer

7. Y X O Y1 Q1 Y2 IN Q2 INCOME QUANTITY IG

8. Substitute goods-

9. Complementary goods

10. Prince of coffee Prince of petrol Demand for tea Demand for cars Y Y O O X X L R K H

11. Cross demand or C ross price effect

12. Demand function D x Demand for commodity x F shows functional relation between? P x Price of commodity x P X-1 Price of all other commodities Y Income of the consumer T Tastes and preferences of consumer E Expectations of future prices H Size of population y Distribution of income G Government’s policy It states the relationship between the demand for a product and its determinants. D x = f( P x …P X-1 , Y, T,E,H,y,G …)

13. Law of demand The law of demand shows a functional relationship between price and quantity demanded of a commodity.

14. Statement of the Law

15. Assumptions ( other things remaining equal…)

16. Demand Schedule

17. ( 1) individual demand schedule Price ( Rs . Per kg.) Qty. Demanded (kg per week) 30 1 25 2 20 4 15 6

18. ( 2) Market demand schedule Market demand schedule is a table which shows various quantities of a commodity that all the buyers (consumers) will purchase at different prices during a given period. It is composed of the demand schedules of all individuals purchasing that commodity. It can be obtained by adding up the quantities purchased at different prices by all the households in the market.

19. Market Demand schdule Price Rs . per kg. Demand by ‘A’ Demand by ‘B’ Market Demand 30 1 2 25 2 3 20 4 5 15 6 7

20. Demand Curve and d erivation of demand curve

21. Types of demand curve:

22. Why Does the Demand Curve Slope Downwards to the Right? 1 2 3

23. Why Does the Demand Curve Slope Downwards to the Right? 4 5

24. We may observe that more quantity of a commodity is demanded at a higher price, and less of it is demanded a lower price. In these situations, ,the inverse relationship between price and the amount purchased does not hold good. These are known as exceptions to the law of demand in such situations, demand curve may not have a negative slope; it may slope upward showing positive relation. Exceptions to the Law of Demand

25. Exceptions to the Law of Demand

26. Movement along the demand curve When the amount demanded changes (rises- or falls) as a result of change in its own price, while other determinants of demand (like income, tastes and prices of related goods) remain constant, it is known as Change in Quantity Demanded Movement along the Demand Curve It may be of two types: Extension of demand Contraction of demand. Y X P2 P1 Q3 Q1 QUANTITY PRICE O Q2 P3 A2 A1 A3 D D

27. Extension of demand

28. Contraction of demand

29. Increase in demand

30. Decrease in demand

31. Alternative individual demand schedule for Apples Price ( Rs . per kg.) Qty. Demanded (Income Rs.8000/-) Qty. Demanded (Income Rs.10,000/-) 30 1 2 25 2 3 20 4 5 15 6 7

32. Y X P Q1 Q2 QUANTITY PRICE O Q3 A2 A3 A1 D3 D2 D1

33. Factors which causes change in demand Increase in demand Increase in income Rise in the price of substitute goods Fall in the price of complementary goods Favourable change in tastes and preferences Expectation of rise in price Increase in population Decrease in demand Decrease in income Fall in the price of substitute goods Rise in the price of complementary goods Unavourable change in tastes and preferences Expectation of fall in price Decrease in papulation

34. Distinction between Extension of Demand and Increase in Demand

35. Distinction between Contraction of Demand and Decrease in Demand

36. THANK YOU