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Conceptofdemandsupply 121025031512-phpapp01
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Conceptofdemandsupply 121025031512-phpapp01
Conceptofdemandsupply 121025031512-phpapp01
Conceptofdemandsupply 121025031512-phpapp01
Conceptofdemandsupply 121025031512-phpapp01
Conceptofdemandsupply 121025031512-phpapp01
Conceptofdemandsupply 121025031512-phpapp01
Conceptofdemandsupply 121025031512-phpapp01
Conceptofdemandsupply 121025031512-phpapp01
Conceptofdemandsupply 121025031512-phpapp01
Conceptofdemandsupply 121025031512-phpapp01
Conceptofdemandsupply 121025031512-phpapp01
Conceptofdemandsupply 121025031512-phpapp01
Conceptofdemandsupply 121025031512-phpapp01
Conceptofdemandsupply 121025031512-phpapp01
Conceptofdemandsupply 121025031512-phpapp01
Conceptofdemandsupply 121025031512-phpapp01
Conceptofdemandsupply 121025031512-phpapp01
Conceptofdemandsupply 121025031512-phpapp01
Conceptofdemandsupply 121025031512-phpapp01
Conceptofdemandsupply 121025031512-phpapp01
Conceptofdemandsupply 121025031512-phpapp01
Conceptofdemandsupply 121025031512-phpapp01
Conceptofdemandsupply 121025031512-phpapp01
Conceptofdemandsupply 121025031512-phpapp01
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Concept of Demand

Concept of Demand

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  • 1. By SHRUTI SATIJA CONCEPT OF DEMAND 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)1
  • 2. DEMAND 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)2  Desire backed by ‘willingness’ and ‘ability’ to pay for a commodity.  It implies:  Desire to acquire it  Willingness to pay for it  Ability to pay for it.
  • 3. Demand by Market Segment and Total Market. 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)3  Geographical spread  Product uses  Distribution channel  Customer size  Product variety
  • 4. TYPES OF DEMAND 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)4 1. Consumer goods and Producer goods  Consumer goods- Goods & services used for final consumption.  Producer goods- Goods used for production of other goods. 2. Perishable and Durable goods. 3. Autonomous and Derived demand  Autonomous- Goods whose demand is not tied up with the demand for some other goods. 4. Individual’s demand & Market demand  Mkt dd is the summation of dd for a good by all individual.  Price of X and dd by buyer1,2,3 and all buyers market dd.
  • 5. 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)5 5. Firm & Industry demand  All firms producing a particular good.  Eg.- DD for Hyundai car and all types of car. 6. Demand by market segment and total market.  Geographical spread  Product uses  Distribution channel  Customer size  Product variety
  • 6. DEMAND FUNCTION 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)6  The DD function is an algebraic expression of the relation between the demand for a commodity and its various determinants. Dx = f(PX , PS, PC, Y, T,E,U ) Dx = Demand for X item PX = Price of X item PS = Price of substitute goods PC = Price of complimentary goods Y= Income of consumer T= Taste or preference of consumer E= Price expectation of the user U= All other factors
  • 7. DETERMINANTS OF DEMAND 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)7  Price of the commodity  Price of the related commodities  Substitute goods.  Complimentary goods.  Income of the consumer d  y  Normal goods.  Necessites.  Inferior goods.  Tastes & preferences of consumer.  Expectations about future price.
  • 8. DETERMINANTS OF DEMAND 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)8  Size and regional distribution of population.  Composition of population.  Distribution of income.
  • 9. CAUSES OF CHANGE IN DEMAND 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)9  INCREASE IN DEMAND: • In income & wealth of the people. • In the population. • In the prices of substitute goods. • In the prices of complementary goods. • Expectations of rise in prices in future. • Changes in tastes, preferences, habit, customs in favor of a commodity.
  • 10. CAUSES OF CHANGE IN DEMAND 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)10  DECREASE IN DEMAND: • In income & wealth of the people. • In the population. • In the prices of substitute goods. • In the prices of complimentary goods. • Expectations of fall in prices in future. • Changes in tastes, preferences, habit, customs, against a commodity
  • 11. CHARACTERISTICS 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)11 CONCEPT OF DD DEMONSTRATES THE FOLLOWING:  Demand is always with reference to a price.  Demand is referred to in a given period of time.  Consumer must have the necessary purchasing power to back his desire for the commodity.  Consumer must also be ready to exchange his money for the commodity in question.
  • 12. LAW OF DEMAND 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)12  The inverse relationship between the price and quantity demanded of a commodity, other things remaining the same (ceteris paribus).  In other words, when the (price of goods) s, dd s and when p , dd , provided factors other than the price do not changed.
  • 13. Downward sloping in DD curve 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)13
  • 14. Reason for downward sloping Curve 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)14 1. Law of diminishing marginal utility.  As a consumer keeps on consuming successive units of the same commodity, consumption of other commodities remaining constant, MU diminishes. 2. Income effect. 3. Substitution effect. 4. Changes in the number of consumers. 5. Diverse uses of commodity.
  • 15. EXCEPTIONS TO LAW OF DEMAND 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)15 1. Prestige is directly associated with price of goods. 2. Giffen paradox 3. Emergency 4. Expectations about future price
  • 16. CHANGE IN DEMAND & CHANGE IN QUANTITY DEMANDED 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)16 CHANGE IN DEMAND  Change in demand essentially happens due to a change in the factors affecting demand.  Change in demand causes a shift in the Demand Curve ,i.e., an increase in demand causes the demand curve to shift outwards whereas a decrease causes an inward shift. CHANGE IN QUANTITY DEMANDED  Change in quantity demanded happens essentially due to a change in the price of that commodity.  Change in quantity demanded causes a movement along the demand curve.
  • 17. MOVEMENT ALONG DD CURVE 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)17  A movement along a demand curve occurs when the ONLY factor that changes .
  • 18. 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)18  It is just an arrow along the demand curve in the correct direction. As price increases the movement would be to the left, as price decreases the movement would be to the right. If the quantity decreases it is known as contraction. If the quantity increases it is known as expansion
  • 19. SHIFT IN DD CURVE 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)19
  • 20. 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)20  In this diagram the shift from demand curve D1 to demand curve D2 is represented by an actual translation across the plane. This particular diagram features an inward shift to the left, or a shrink in demand. An outward shift would be an increase in demand. This shift is caused by any actual changes in the determinants of demand.
  • 21. CONCEPT OF SUPPLY 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)21
  • 22. SUPPLY 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)22  It is the willingness and ability of producers to make a specific quantity of output available to consumers at a particular price over a given period of time.  Supply is the mirror image of demand.
  • 23. LAW OF SUPPLY 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)23  There is positive relation between price and quantity supplied other things remaining constant.  Variables other than price:  Money cost of production  Inter-related supply
  • 24. TYPES OF SUPPLY CURVE 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)24  The supply curve is upward sloping.  There are TWO types of change in supply;  1. Movement ALONG the supply curve 2. SHIFTS in the supply curve
  • 25. A movement ALONG the supply curve 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)25  A movement along the supply curve is caused by a change in PRICE of the good or service.  For instance, an increase in the price of the good results in an EXTENSION of supply (quantity supplied will increase), whilst a decrease in price causes a CONTRACTION of supply (quantity supplied will decrease).
  • 26. A SHIFT in the supply curve 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)26  A shift in the supply curve is caused by a change in any non- price determinant of supply. The curve can shift to the right or left.  A rightward shift represents an increase in the quantity supplied (at all prices) S1 to S2, whilst a leftward shift represents a decrease in the quantity supplied (at all prices). S1 to S3.
  • 27. THINGS TO REMEMBER 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)27  The supply curve follows the law f supply when price and quantity supplied increases and vice versa.  The horizontal axis-quantity-has time dimension.  The quantities are of the same quality.  The vertical axis-price-is a relative price.  The curve assumes everything else is constant.  Effects of price is shown by movement and shift in supply curve.
  • 28. MARKET EQUILIBRIUM PRICE A price that can be maintained Supply Quantity Price Demand E P Q E is the state of balance, from which there is no tendency to change. SURPLU S SHORTAG E
  • 29. THANK YOU 9/19/2013 Managerial Economics Unit-I CONCEPT OF DEMAND (Batch 2012-14)29

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