QIS COLLEGE OF Engineering & Technology
Venga mukala palem,ongole-523002,
Prakasam (Dt), A.P
NATURE AND TYPES OF DEMAND
FACTORS DETERMINING DEMAND
LAW OF DEMAND
SIGNIFICANCE OF LAW OF DEMAND
A relation between the price of a good and the quantity that consumers
are willing and able to buy during a given period, other things constant.
Willing: you want to buy the product
Able: you can afford the buy the product
NATURE AND TYPES OF DEMAND:
Demand always implies at a given price how much is the
quantity demanded at a given level of price? This is the
volume of demand. The use and characteristics of
Different products affect their demand. In other words a
product with more number of uses is naturally more in
demand than one with a single use.
1. CONSUMER GOODS VS. PRODUCER GOODS:
Consumer goods means the products and services which capable of
satisfactory human needs. Goods can be grouped into consumer goods and
producer goods. Consumer goods are those which are available for ultimate
consumption, these give direct and immediate satisfaction.
Ex: - bread, apple, rice.
Producer goods are those which are used foe further processing or production
of goods or services to cash income.
Ex: - machinery, tractor.
2. AUTONOMOUS DEMAND VS DERIVED
DEMAND:Autonomous demand refers to the demand foe
products & services directly.
Ex: - The demand for the services of a super
specialty hospital can be considered as
autonomous, where as the demand for
hotels around that hospital is called a
derived demand, if there is no demand for
houses, there may not be demand for steel,
cement, bricks, demand for houses is
autonomous whereas demand for these
inputs is derived demand.
3. DURABLE VS. PERISHABLE GOODS: Here the demand for goods is classified based on their durability. Durable
goods are those goods which give service relatively for a long period. The life
of perishable goods is very less, may be in hours or days.
Ex: - milk, vegetables, fish.
Rice, wheat, sugar, these are examples for durable goods.
Freezing facilities, the life of perishable goods can be extended for sometime.
Products such as:
TV, refrigerator, and washing machines are useful for a longer period, hence
they are classified as consumer durables.
4. FIRM DEMAND VS INDUSTRY DEMAND: The firm is a single business unit where as industry refers
to group of firms carrying on similar activities. The
quantity of goods demanded by a single firm is called
firm demand and the quantity demanded by the industry
as a whole is called industry demand.
Ex: - one construction company may use 100 tones of
cement during a given month. This is a firm demand. The
construction industry in a particular state may have used
ten million tones. This is industry demand.
6. NEW DEMAND VS REPLACEMENT
DEMAND: New demand refers to the demand for the new products
and it is addition to the existing stock. In replacement
demand, the item is purchased to maintain the asset in
Ex: - the demand for cars is new demand and demand
for spare parts is
7. TOTAL MARKET AND SEGMENT
MARKET DEMAND: The consumption of sugar in a given
region, the total demand for sugar in
the region is the total “market
The demand for sugar from the sweet,
making industry from this region is the
segment market demand. Ex: - sugar
Determinants of Demand
Prices of substitutes
Price of commodities:
A consumer generally purchases large amount of
commodities when price declines, and vice versa.
thus we can say that for a normal good the price
and demand inversely. A fall in the price increase
consumer purchasing, power, and vice versa.
Income level of the consumer (I).
With in increase income of house hold buy
increased amount of commodities. normally the
income of the house hold and quantity of demand
goes in same direction.
Prices of related goods which may be substitutes or
When a change in price of one commodity influences the
demand of other commodity. Commodities are two types.
When price of one commodity and quantity of other
commodity move in same direct are called substitutes.
Ex: tea and coffee.
On the other hand the price of one good
increase and quantity of other commodity is also
Ex: pen and ink
Consumer may have two kinds of expectations.
1.expectations related to future income
2.expectations related to future price
If the customer expects a higher income he spent more so
demand increases in future.
If the consumer expects a future price of good to increase
he would rather than like to buy the good now than later.
The Demand Function
Dx = f ( Px, Pc, Ps, Y, t, E)
Px = Goods which obey and do not
obey the Law of Demand
Pc = Price of Complimentary Goods
Ps = Cost of Substitute Goods
Y = Income
t = Tastes
E = Consumers Expectation
Law of Demand
States that a quantity of a good demanded
during a given period relates inversely to
its price, other things constant.
Price increases Quantity Demanded
Price decreases Quantity demanded
Creates a downward sloping demand curve
A curve showing the relation
between the price of a good and
the quantity demanded.
Point on the line that matches the schedule
Every point on the line matches the
It is a price/quantity demanded
are willing and able to buy.
Movement Along the
Caused by a change in price
◦ Only a change in price
Move from one point to another on the
◦ Change in quantity demanded.
Movement along the Demand Curve
Changes in Demand
The increase or decrease in demand due to change in the
factors other than prices to change in the factors other than
price is called change in demand. Change in demand leads to
a shift in the demand curve to the right or the left.
Increase in demand
◦ At each and every
price MORE of the
good is demanded
◦ Shifts to the right
Changes in Demand
◦ At each and every
price Less of the
good is demanded
◦ Shifts to the Left
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