application of law of demand

2. LAW OF DEMAND
•Law of demand states, that
other things being equal,
the demand for a good
extends with fall in price
and contracts with a rise in
price.

3. ELASTICITY OF DEMAND
% Change in quantity demanded
E =
% Change in price

4. PRICE ELASTICITY OF
DEMAND
The % change in the quantity demanded that results from a one
% change in its price.
P
Q
D
D
P



%
%


5. INCOME ELASTICITY OF
DEMAND
INCOME
ELASTICITY=
%CHANGE IN QUANTITY DEMAND
% CHANGE IN INCOME

6. CROSS ELASTICITY OF
DEMAND
•
CROSS ELASTICITY OF DEMAND=
% CHANGE IN DEMAND OF ‘X’
% CHANGE IN PRICE OF ‘Y’

7. APPLICATIONS OF LAW OF
DEMAND
• Significance in Price Determination.
determination of price under monopoly,
price discrimination,
Remuneration of factor of production ,
Dumping.
• Importance in Government Policy Formulation.
Advantage to finance minister,
distribution of burden of taxation,
Price control policy,
protection to industries.
• Demand Forecasting
• Fixation of Rail Freight charges
• Wage Determination

8. •International Trade
•Paradox of Poverty
•Effect on Employment

9. Use of ELASTICITY OF DEMAND in
business management
•IN PRICE STRATEGY
•IN MARKETING
•IN PRODUCTION

10. THANKYOU