Law of Demand and The Demand Curve are discuss here.

1. Law of Demand
The Demand Curve
Prepared by:
Smriti Chakrobarty
Lecturer
Fisheries and Marine Science
Noakhali Science and Technology University
Shared by:
Md. Asrafur Rahman
ASH1402072M
Fisheries and Marine Science
Noakhali Science and Technology University

2. Demand
•When there is a combination of wish and ability
or power to buy a commodity, then the condition
is called demand.
•Three things are important -
1. Economic commodity.
2. Marginal utility is positive (should have ability
to fulfill the wants).
3. There is exchangeable price of the commodity.

3. Demand Function
•The demand of a product (Qx) will be
influenced by price of the product (Px), price of
the substitute good (Ps), price of the
complimentary good (Pc), income (Y) and taste
(T) of the consumer.
•The equation that express the dependable
relationship between these parameter and
demand of the product is called demand
function.

4. •Qx = g (Px, Ps. Pc, Y, T)
•If Ps. Pc, Y, T are constant, then demand function
is –
Qx = f (Px)
•Demand schedule
•Demand curve

5. Law Of Demand
•The relationship between the quantity
demanded of a commodity (Q) and the price (P)
of the commodity - law of demand.
•If Ps. Pc, Y, T are constant -
•So, demand will be decreased with increasing
price of a commodity.
•Also, demand will be increased with decreasing
price of a commodity.
•The alternative relation between demand and
price of a commodity is called law of demand.

6. Exception to the Law of Demand
1. Giffen good:
-Robert Giffen – England – if price of bread
increases, then the labor buy more bread
than previous time.
2. Veblen goods:
- Thorstein Veblen – wealthy person show
demonstration effect in case of buying of
some special products.

7. 3. Money illusion – negative.
4. Savings propensity of the consumer
5. Speculative motive of the consumer
6. Changes in taste.
7. Prices of complementary and substitute
goods.
8. Income effect.

8. Downward sloping demand curve
•The graphical representation of the demand
schedule – demand curve.
•Since quantity and price are inversely related, so
if P goes down then Q goes up.
•The curve opus downward, going from northwest
to southeast.
•Quantity demanded tends to fall as price rises for
two reasons.

9. •First, substitution effect. When price of a good
rises, will substitute other similar goods for it.
•Second, income effect. When price rises, find
himself poorer than before.
•Forces or determinants behind the demand:
1. Average income of consumer or per capita
income of the people.
2. Size of the market or changes in population.
3. Changes in prices and availability of substitute
goods and complimentary goods.

10. •4. Advertisement
•5. Age structure of consumer
•6. Government activity
•7. Price expectation
•8. Time
•9. Consumer’s credit
•10. Changes in own price
•11. Tastes, choice and habit
•12. Special influences

11. •Factors affecting the demand curve shift:
1. Changes in consumer’s income.
2. Population or numbers of consumers
3. Prices of related (substitute or complimentary)
goods.
4. Changes in taste.
5. Special influences.
6. Changes in future price expectations
7. Changes in tax imposition 8. Advertisement

12. Increase or decrease in demand/shifting of
demand curve
Income effect:
•If Px is fixed and other parameters are in changing
condition, then demand will be changed.
•Positive change – increase of demand.
•Negative change – decrease of demand.
•If income of a consumer increase – demand will
be increased (P0 fixed).
•D1 – primary demand curve. D2 – new demand
curve.

14. P Q P Q
Coffee 40 50 60 30
Tea 20 40 20 50

15. Complimentary goods:
•If price of a good (sugar/milk) decreases
among two complimentary goods, then due
to increase of demand of the first good; the
demand of second good (tea) will be
increased.
•So, demand curve will be shift to rightward.

16. P Q P Q
Milk/Sugar 10 20 20 15
Tea 20 40 20 35

17. Price increase due to demand increase:
•Due to increase of consumer income or change
in consumer taste.
•Demand curve move outward.
Price decline due to demand decrease:
•Due to decrease of consumer income or change
in consumer taste.
•Demand curve move inward.

18. Thank You