This document discusses the concept of demand, types of demand, factors affecting demand, and elasticity of demand. It defines demand as the desire, ability, and willingness to purchase a product. The two main types of demand are individual demand and market demand. Market demand is the total of individual demands. Factors that influence demand include price, income, tastes, availability of substitutes, and expectations of future prices. Elasticity of demand refers to the responsiveness of quantity demanded to price changes. There are different types of elasticities such as perfectly inelastic, relatively elastic, and unitary elastic demand.

1. Module-I, Part-II

2. Demand Analysis
 Demand:
 It should satisfy the following conditions
 Desire to have possession or buy a product.
 Ability to purchase.
 Willingness.
 Demand = Desire + Ability + Willingness.
 Demand is related to Price and Time.

3. Types of Demand
 There are two types of demands:
1. Individual demand
2. Market demand
 For example:
Mr. A – buys Sweets
Mr. B – Fruits
 Individual Demand: It refers to the demand of commodity
from an individual.
 Market Demand: It is the total of individual demands for a
particular commodity. It is the quantity of commodity willing
to buy at given price at a particular place.

4. Other Demands
 Direct Demand
 Derived Demand
 Joint Demand
 Composite Demand
 Competitive Demand

5.  Direct Demand: it refers to demand for direct
consumption
 For Example: Soaps, Milk, bread, sweets & fruits.
 Derived Demand: It refers to demand for raw
materials of commodity to produce products.
 For Example: (Festival)
 Sweets
 Labours
 Raw Materials
 Joint Demand: It refers to increase in demand of one
commodity, increases the demand for another
commodity.
 For Example: Car & Petrol.

6.  Composite Demand:
 For example: Demand for Electricity
 Heating utensils
 Geazer
 Cooking
 Television
 Competitive Demand: It refers to competition to the
demand of a particular commodity by another
commodity.
 For example: Tea & Coffee.
 The demand or prices of tea affect the demand of Coffee
and Viceversa.

7. Law of Demand
 Which guide us to help the producers what to produce,
when o produce, how to produce and how much to
produce.
 It states that the relationship between price of a commodity
and the quantity of that commodity assuming other factors
to be constant.
 Dx = f(Px )
 Dx is the demand of commodity ‘x’
 Px is price of the commodity ‘x’
 Demand of commodity ‘x’ = function of price of
commodity ‘x’.
 MARSHALL – Economist. (Law of Demand)
 The price of a commodity is decreasing, demand increases.
 The price is increasing – Demand decreases.

8. Demand Schedule
Price of Commodity ‘x’ (Rs) Demand of Commodity ‘x’
(Units)
10 5
8 10
6 15
4 20
2 25

9. Demand Diagram
0
2
4
6
8
10
12
0 20 40 60 80 100
Demand Vs Price

10. Assumptions of Law of Demand
 No Change in tastes, habits , preferences,…. Of
consumers.
 No change in the income.
 No availability of substitutes.
 No anticipation of price change of a product.
 No change in demographic factors.
 No Change in the taxation policy.
 No change in the technology.
 No change in the weather conditions.
 Normal goods.

11. Market Demand Schedule
Price
Quantity
demanded Market
demand
Mr. A Mr. B
Mr.
C
10 5 10 15 30
8 10 15 20 45
6 15 20 25 60
4 20 25 30 75
2 25 30 35 90
0
2
4
6
8
10
12
0 20 40 60 80 100
Market Demand Vs Price

12. Exceptions to the Law of Demand
 Giffen Goods ( Inferior goods )
 Decrease in the price of low quality goods do not affect
the demand.
 Prestige Goods (Diamond Necklace).
 Anticipation of change in price.
 Rs. 10 – 1kg + 2kg
 Rs. 16 – (tomorrow)
 Change in fashion. (Dresses)
 Promotional Activities.
 Changes in quality.
 Demonstration effect.

13. Factors of Individual Demand
1. Price of product: -If the demand of a product is to be
increased, then the price of it should be decreased.
2. Price of substitutes :-Demand of a product varies based on
the equivalent substitute for that.
For example: Sprite – 7up,
3. Price of Complementary Goods:- If the price of one
product decreases, then the demand for its complementary
product increases. For example: Ink Pen and Ink Bottle.
4. Utility: it refers to usefulness of a product. If I consume
wheat daily instead of rice. i.e. wheat is having utility factor
of demand.
5. Disposable income:- it is the net usable income for our self
purpose after the taxes are being deducted from salary.

14.  Tastes & Preferences : if one likes the product or
prefer to use the same product always, then the
demand of that product increases.
 Quality of the product: If the quality of the product
is up to the mark or expectations or satisfaction of
consumers or buyers, then demand for the product
increases.
 Intensity of the Want: how much want or desire to
buy a product is intensified. If there is an emergency
to use a product in a certain quantity now or today,
then the demand for that product is increased.
 For example: Rain coats during rainy season, Face
Mask during Covid-19, etc.

15.  Future price expectation: if there is an anticipation
in the change of price of a product, then there will be
changes in the demand also.
 For example: Onions – Let the cost of Onions today is
Rs.14 per Kg, if someone says that its price will
decrease as Rs. 12 per Kg, then the demand today
decreases and demand for it tomorrow increases.
 Promotion of the product: if there is good
promotion/advertising of a product and salesmanship
is good, then demand for that increases.

16. Factors of Market Demand
 Size of the population: Larger the size of the
population, higher the demand of the product.
 Distribution of income and wealth: if income and
wealth are equitably distributed in a particular area,
then the demand can be calculated.
 For example: if a colony consists more Upper class
people and less middle/lower class people, then there
would be more demand for luxurious goods.
 Standard of living: if the standard of living is posh,
then there will be high demand for luxurious goods.

17.  Level of Taxation: if the level of taxation increases,
then the disposal income decreases and then demand
for goods.
 Social Customs and Festivals: As there were lots of
customs and festivals in India where, we are living in.
 There is increase in demand for certain products like
clothing, sweets and rituals concern.
 Promotional Activities: if the promotions of a
product is a high level, then the demand for that is also
at the same. For example: advertising.
 These are all the determinants or factors of Market
demand.

18. Variation in demand
 Demand changes due to change in prices alone, and
other factors remains constant.
 Expansion of demand.
 Contraction of demand.

19. Expansion of demand
 It is also called extension of demand.
 It takes place when quantity demanded is more due to
fall in price alone. Other factors remains constant.


20. Contraction of Demand
 It takes place when the quantity demanded is less due
to increase in price.

21. Changes in Demand
 It refers to increase or decrease in demand due to
factors other than the price.
 Increase in Demand.
 Decrease in Demand.

22. Increase in Demand
 It refers to increase in the demand due to the factors
other than price.

23. Decrease in demand
 It refers to decrease in demand due to the factors other
than price.

24. Elasticity of Demand
 It is the measurement of change in quantity demand
due to change in price of the commodity.
 It refers to the degree of responsiveness of quantity
demand due to change in price.

25. Types of Elasticity of Demand
 Price Elasticity of Demand.
 Income Elasticity of Demand.
 Cross Elasticity of Demand

26. Price Elasticity of demand
 Price elasticity of demand generally known as elasticity
of demand, that shows how much expansion and
contraction of demand due to fall and raise of price of
a commodity.
 There was inverse relationship between price and
demanded quantity.
 The value of price elasticity of demand always have a
Negative Sign.

27. Types
 Perfectly elastic demand.
 Perfectly inelastic demand.
 Relatively elastic demand.
 Relatively inelastic demand.
 Unitary inelastic demand.

28. Perfectly Elastic Demand
 When the percentage change in quantity demanded
is infinite even if the percentage change in price is
zero, the demand is said to be perfectly elastic.
Endless demand at given price.

29.  When the percentage change in quantity demanded
is zero no matter how price is changed, the demand is
said to be perfectly inelastic
Perfectly Elastic Demand

30. Relatively Elastic Demand
 When the percentage change in quantity demanded is
greater than the percentage change in price, the
demand is said to be elastic.

31.  More change in the price of the goods but less change
in demand for the goods.
Relatively Inelastic Demand

32.  The proportion of change in demand is equal to
proportion of change in price.
Unitary Inelastic Demand

33. Elasticity of Demand Coefficient
S.NO. Elasticity of Demand Elasticity Coefficient
1 Perfectly Elastic Demand ∞
2 Perfectly Inelastic Demand 0
3 Relatively Elastic Demand >1
4 Relatively Inelastic Demand <1
5 Unitary Inelastic Demand 1

34. How to calculate Price Elasticity of Demand
 1. Proportionate/Percentage Method.
 2. Total Expenditure / Outlay Method.
 3. Geometric/Point Method.

35. Proportionate/Percentage