1. Demand
Demand: The desire for any commodity backed by need,
ability and willingness to spend is considered as demand in
economics; i) Need ii) Ability to pay iii) Willingness to spend
Demand Concepts:
i) Negative demand: people fears with the demand
ii) No demand: people don’t know about the product
iii) Latent demand: expect more from existing product
iv) Decline demand: demand is gradually decreasing
v) Irregular demand: demand is fluctuating
vi) Full demand: demand and supply is optimum
vii) Overfull demand: demand is grater then supply
viii) Unwholesome: demand is harmful for the society
ix) Joint demand: when demand is dependent
x) Composite demand: for building; iron, cement, breaks
2. Demand Concepts
xi) Derived demand: demand for business goods derive
from consumers goods.
xii) Autonomous demand: independent or individual
Law of Demand:
Express the financial relationship between price and
quantity. If the price of a commodity falls, the quantity
demanded of it will rise (other things remaining the same).
Demand Schedules and Curve:
The law of demand can be illustrated by carve or schedule.
i) Schedule is table; carve is graphic presentation
ii) Schedule is first; from schedule prepare a curve
iii) Schedule is row & column based; upward to downward
iv) Schedule indicates1, 2, 3, ; curve indicate p, q, r
v) Schedule is singular form; curve is different types
4. Why Does Demand Curve Slop Downward
i) Law of diminishing marginal utility: law of DMU is
applicable in demand theory.
ii) Income effect: income fixed but price high, decrease
demand and income high and saving tendency
iii) Substitution effect: high price of tea, increase the
demand of coffee.
iv) Change of using pattern: changes of test, habit, dress;
if the price low consumer purchase more.
v) Number of customer: increase the customer of existing
product, if the price low customer purchase more.
Limitations of Law of Demand
i) Other things remaining constant: it is not impossible
ii) Change of expectation: influence demand
iii) Giften goods: low price good, high price high demand
iv) Prestigious product: high price high demand
5. Limitations of Law of Demand
v) Shortage of product: if possibility of out of market
vi) Emergency product: for medicine or food
vii) Lack of knowledge: high price means quality product
viii) Environment: forced demand negatively
ix) Inferior goods: people reject existing for high income
Shift of Demand Curve:
Price changes factor;
i) Extension: price reduce and demand increase
ii) Contraction: price increase and demand reduce
Price constant factor;
i) Increase: price constant but demand increase
ii) Decrease: price constant but demand decrease
7. What if the Demand Curve Shifts
What happens to the equilibrium price of product when
its demand curve changes?
a) Effect of a shift to the left of the demand curve:
when reduce production, and decrease the demand of
the product then the demand curve shift to the left. As
shown in the Figure-3, one would expect that the
leftward shift to the demand curve would have resulted in
a decrease in the price from p to p1. The supply
situation is fixed and demand shift leftward.
a) Effect of a shift to the right of the demand curve:
when increase production, and increases the demand of
the product then the demand curve shift to the right. As
shown in the Figure-4, one would expect that the
rightward shift to the demand curve would have resulted
in a increase in the price from p to p2. The supply
situation is fixed and demand shift rightward.
8. Y
0 X X
Di
Di
D
D
Q1 Q
P1
P
S
S S
S
Y
0
P2
P
Q2Q
Di
Di
D
D
OY=price OX= quantity DD=existing demand curve
DiDi= shifting demand curve SS=fifed supply curve
Leftward shift resulted in decrease in price from P to P1
Rightward shift, resulted in increase price from P to P2
Shift to the left Shift to the right
9. Determinants or Causes of Changes of Demand
a) Change in real income: increase or decrease demand
b) Climate or weather change: change of season
c) Change in population: cross culture, new home, dress
d) Changes in money supply: inflation and deflation
e) Change in the price: price demand relation
f) Change saving: large saving and low consumption
g) Condition of trade: favorable or unfavorable trade
h) Change price of related goods: joint demand, supply
i) Habit of customer: influence demand
j) Distribution: proper distribution increase demand
k) Stock situation: product crisis increase demand
l) Future prospects: people purchase more
m) Marketing program: high promotion increase demand
n) Govt factors: govt. rules and role influence demand
10. Demand Function:
Demand Function is the relationship between demand and
their influencing factors.
Qdx = f (Px, I, T, py ------).
Qdx = demand for x product; Px = price of x product;
I = income of the customer T = test of the
customer
Individual demand: demand of the individual people for a
particular product. Demand for x product of a, b, c is 5,6,7
Market demand: demand of the total people for a particular
product. Market demand for x product is (da + db + dc).
i) Price demand function: price demand relationship
ii) Income demand function: income demand relationship
iii) Cross demand function: related product demand
11. Price Demand
5 2
3 4
2 5
Price Demand
for X
Demand
for Y
Market
demand
5 3 2 3+2=5
3 4 3 4+3=7
2 5 1 5+1=6
Individual Demand Schedule
Market Demand Schedule
