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Demand
- 1. :
- 2. The quantity of goods consumers are willing and able to buy at different prices in a given period of time
- 3. Determinants of Demand Examples Effect on Demand Income of the consumer: a) Normal Goods b) Inferior goods Decrease in salary of customer Decreases the demand or shift of demand curve to left Taste and Preference Favorable preference Increase in demand Price of Product: a) Substitute goods b) Complementary goods Increase in price of onions Decrease of demand Consumer Expectation for future change in price potatoes price will rise in future More demand in present or increase in demand today Population Population increases in country Demand rises Seasonal Conditions Woolen clothes in winter and in summer Demand increase in winter & decreases in summer
- 4. Individual and Market DEMAND Individual Demand: from single individual/family/household. Market Demand: Total demand of all buyers, taken together.
- 6. /
- 7. D D
- 11. quantit y P R I C E Highly Type of demand that is not needed, typically those luxuries goods Many substitutes… Ed>1
- 12. Type of demand that is necessary for humans.. No substitute or cannot be replaced Highly Ed<1
- 13. See the Difference… Area of inelastic and elastic demand curves P R I C E quantity 0 quantity 0 Ed<1 Ed>1
- 14. Perfectly Inelastic Demand %change in price had no effect on Demand
- 15. Perfectly Elastic Demand Ed= ∞ % change in quantity demanded is equal to the infinite price.
- 16. Unitary Elastic Demand Ed=1 %change in price is equal to the % change in quantity demanded
- 17. Determinants of PED the availability of substitutes: the more substitutes there are for a product, the more elastic its demand. the importance of being unimportant: if an item represents a small part of the consumer’s budget, then less attention is paid to its price (demand is more inelastic). time: the more time consumers have, the more responsive they are to price changes (and demand is more elastic).
- 18. Methods of measuring PED Percentage method Graphical Method Total Outlay or Expenditure Method
- 20. 0
- 22. Calculate by PRIICE × Quantity Demanded
- 23. Change in Demand Shift along demand curve Extension in demand Contraction in demand Shift in demand curve Increase in demand Decrease in demand
- 24. Shift along demand curve
- 25. Shift in Demand Curve
Editor's Notes
- Subsitute that can be used in place of other goods Complemetary those which are used togther Normal goods inrease in income will decrease demand nd vice versa Inferior increase in income increase demand
- Exceptions means not applicaable to this laaw Giffen goods increaase with increasee in price…. he most commonly cited example of a Giffen good is that of the Irish potato famine in the 19th century. During the famine, as the price of potatoes rose, impoverished consumers had little money left for more nutritious but expensive food items like meat (the income effect). So even though they would have preferred to buy more meat and fewer potatoes (the substitution effect), the lack of money led them to buy more potatoes and less meat. In this case, the income effect dominated the substitution effect, a characteristic of a Giffen good.