What is demand in economics?
People’s want or need of a certain good
or service backed by ability and
willingness to pay
How is this demand any different from
any other type of demand? Like Political
Drawing a demand curve
Suppose, I will pay you Rs.10/- per hour,
how many of you will be willing to work
What if I raise this pay to Rs.20/- per
If I raise it further to Rs.50/- per hour?
A demand curve requires a demand schedule
before it can be drawn
A demand schedule describes the demand for
a commodity/ service at any given point of
time at various prices offered in the market
Demand curve then plots out the demand
schedule on a graph
Key features of Demand curve
Demand curve shows the negative relationship
between price and quantity demanded
It slopes downward. Why?
Because the satisfaction that we get by
consuming any commodity reduces as we go
on consuming that commodity. This is called
the law of diminishing marginal utility.
Movement along the demand curve
Suppose the price of apples goes down,
what happens to the demand of apples?
What happens to the demand curve in
This case simply shows us the ‘price
effect’ in a demand curve i.e. this is a
movement along the existing demand
Shift in demand curve
There are other things beside price that affect
demand. What are some of these factors?
E.g. there is a change in income i.e. income
increases. How would this get reflected on the
demand curve of the consumer?
As a result of changes in these other factors,
the demand curve shifts either to the left or
Factors making demand curve shift
Change in income
Prices or availability of substitutes
Prices or availability of complementary
Changes in weather, fashion, fad
Change in the number of buyers
Change in expectations of the availability of
Theory into practice
There has been talk of the Melamchi Water
project for a long time. The Water
Corporation definitely hasn’t been able to
meet the demand of the residents of
Kathmandu Valley. If Melamchi comes then
there is talk of water being abundantly
available. Until then, we have to rely on the
price fixed by the Water Corporation and pay
it irrespective of how much is being supplied.
Questions to think over and answer
Does the law of diminishing marginal utility apply to
water? If yes, how? If no, why?
Is water substitutable in the ‘economic’ sense? If yes,
how? If no, why?
When the price of water goes up, will we start
demanding less of it? How/why?
Given the scarcity of water, if my income increases,
then I will start buying water from ‘Tankers’. What
does this represent in my water demand curve?
Page 56, Q No. 7
To be done and submitted
individually in class today