What is Demand?
Diff. bet Demand and quantity demand
Types of demand - Individual and Market
What is the Law of Demand?
Assumptions of Law of Demand
Why demand curve sloping downward?
Reasons for inverse relationship
Determinents of Demand
What is Band Wagon & Snob effect
What is Demand?
“Demand means effective desire or want for a commodity
which is backed up by the ability (purchasing power) and
willingness to pay for it”.
Demand = Desire + Ability to pay +Willingness to spend
Demand is a relative concept – not absolute
It is related to price , time and place.
“The demand for a commodity refers to the amount of it which
will be bought per unit of time at a particular price
( in a particular market)”.
Period of time concept
At a point of time
Diffrence Between Demand & Quantity Demand
Individual and Market demand
Individual Demand : Individual demand for a
product is the quantity of it a consumer would buy at
a given price, during a given period of time.
Market demand : Market demand for a product is
the total demand of all the buyers in the market
taken together at a given price during a given period
Demand Schedule: ‘ A tabular statement of price –
quantity (demanded) relationship at a given period of
Individual demand schedule
Market demand schedule.
Individual Demand Schedule
Price of Com X
(Rs per kg)
Quantity demanded of
Com X (Qty in kg)
Market Demand Schedule
Price in (Rs) Units of Commodity X Market demanded
per day Demand
by Individuals Total
A B C
4 1 1 3 5
3 2 3 5 10
2 3 5 7 15
1 5 9 10 24
What is the Law of Demand?
When the other things remain constant, if
price rises of a commodity quantity
demanded contracts and vice-versa.
Inverse relationship between price and
What are the Assumptions of
the Law of Demand?
Tastes and Preferences of a consumer are
No change in the income of the consumer
Prices of related goods do not change
No future expectations of price.
Why is the demand curve sloping
Law of Diminishing Marginal Utility
Income effect (positive or negative)
Size of the consumer group
Different uses of a commodity
Reasons for Inverse Relationship
Income effect- the decline in the price of a commodity leads to an
equivalent increase in the income of a consumer because he has to
spend less to buy the same quantity of goods.The part of the money
left can be used for buying some more units of commodity.
For e.g.- suppose the price of mangoes falls from Rs.100/- per
dozen to 50/- per dozen.Then with the same amount of 100/- you
can buy one more dozen, i.e.,2 dozens at Rs. 50/-
Substitution effect-When the price of a commodity falls, the
consumer tends to substitute that commodity for other commodity
which is relatively expensive.
For e.g. – Suppose the price of the Urad falls, it will be used by some
people in place of other pulses.Thus the demand will increase.
What are the causes of Upward
sloping Demand Curve?
It is a special type of inferior goods where the fall in the price results
into the decrease In the quantity demanded.This happens because
of people’s preference for superior commodity
Consumer’s Psychological bias:
Many a times consumer judges the quality of a good from its price.
Such consumers may purchase high price goods because of the
feeling of possessing a better quality.
The exceptional demand curve shows a positive relation between
the price and the quantity demanded.
Determents of Demand
Dx = f(Px,Pr,Y,T,P,E,Yd,A,C,D...)
Px - It is a inverse relationship between price and
Pr -They are two types of goods
1.Complementry goods(Negative Relationship)
2.Substitute goods(Positive relationship)
Consumer income – It is basic determinants of
the quantity demanded of a product. It is a
common knowledge that the people with higher
disposable income spend a large amount on a
normal goods and services than those with
lower income. For the purpose of income
demand analysis goods and services . May be
group of under four broad category –
1) Normal 2) Inferior 3) Luxury goods 4) Initial of
Taste & preferences – In this those goods are
more in demand which are favourable to
consumers and vice-versa.
Population –When population increases,
demand increase and vice-versa. It is direct
Consumer expectation –Their is a direct
relationship.When income rises demand rises
Distribution of National Income – the
distribution pattern of national income also
affect the demand for a commodity. If national
income evenly distributed market demand for a
normal good will be largest. If national income
unevenly distributed majority of population
lower income group market demand for a
essential good will be largest where as the same
for a other kind of good will be relatively low.
Advertisement Expenditure – It is a direct
relationship it become a stagnant
Customer should be sensitive towards advt.
Rival should not copy you
Advt. Cost is included in price
Credit Facility – If credit facility is easily
available, its demand increases.
Ex-Demand for cars and residential flats have
had an unprecedented increase in demand in
India due to mainly to availability of bank loan.
What is a Bandwagon Effect?
Individuals’ demand depends on others’
Commodity is in Fashion
What is a Snob Effect?
Demand depends on the Prestige value of a
Demand curve is steeper (Inelastic)
Changes in quantity demanded & Changes in
Changes in quantity demanded is related to law of
demand i.e. due to changes in price.
When with a fall in price more of a commodity is demanded,
there is EXTENSION of demand & when with a rise in price less
of a commodity is purchased, there is CONTRACTION of
Changes in demand is caused by changes in various
other determinants of demand, the price remaining
When more of a commodity is bought than before at any given
price there is INCREASE in demand & when less of a
commodity is bought than before at any given price there is
DECREASE in demand.
What are the Causes of Increase
Increase in Income of the Consumer
Increase in Price of Substitute goods
Decrease in Price of Complementary goods
Favorable change in tastes
Expected increase in future prices
Increase in number of consumers
Expected increase in future income
What are the Causes of Decrease
Decrease in Income of the Consumer
Decrease in Price of Substitute goods
Increase in Price of Complementary goods
Un-Favorable change in tastes
Expected decrease in future prices
Decrease in number of consumers
Expected decrease in future income
Change in Quantity Demanded
vs. Change in Demand
Change in Quantity
Occurs due to change in
Results in movement from
one point to another on a
fixed demand curve
Also called extension and
contraction of demand
Change in Demand
Occurs due to changes in
determinants other than
Results in shifting of the
demand curve either to the
right or to the left
Also called rise and fall of