Demand refers to the quantity of a good or service consumers are willing and able to purchase at various prices. Demand is affected by the good's own price, prices of complements and substitutes, consumer income and tastes, and consumer expectations. The demand schedule shows the relationship between price and quantity demanded, with quantity demanded decreasing as price increases according to the law of demand. Individual demand schedules combine to form the market demand schedule. A demand curve graphs this relationship, sloping downward from left to right. Shifts in the curve represent changes in demand caused by changes in its determinants.

1. Demand Analysis
By:Mithilesh Trivedi

2. Demand


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The amount consumers
desire to purchase at
various prices
Demand does not
necessarily mean a
consumer WILL buy,
but refers to a good or
service they WOULD
LIKE to buy

3. Effective Demand

Consumers must be willing to buy AND be capable of
paying the price set by the supplier
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4. Law of Demand
If Price rises – Quantity demanded falls
P
Q
If Price falls – Quantity demanded rises
P
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Q

5. Individual Demand

Individual Demand Schedule
Lists the different quantities of a good that an
individual consumer is prepared to buy at each
price
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6. Market Demand

Market Demand Schedule
Lists the different quantities of a good that all
consumers in the market are prepared to buy
at each price. It is derived by adding together
all the individual demand schedules for the
good
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7. Demand Schedule
(Demand for The Wii Games monthly)
(1)
Price
(3)
David’s
demand
(4)
Total market
demand
(# games)
(per game)
(2)
Chris’s
demand
(# games)
(# games)
A
28
16
700
B
40
15
11
500
C
60
5
9
350
D
80
1
7
200
E
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20
100
0
6
100

8. Demand Curve

At higher prices, consumers generally willing to purchase
less than at lower prices

Demand curve is said to have a negative slope - downward
sloping from left to right
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9. Point
100
Price per game
€ 20
A
Market Demand
700 games
Price (per game)
80
60
40
Demand
A
20
0
0
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100
200
300
400
500
Quantity (games)
600
700
800

10. Point
100
Price per game
Market Demand
A
€20
700 games
B
€40
500 games
Price ( per game)
80
60
B
40
A
20
0
0
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100
200
300
400
500
Quantity (games)
600
700
800

11. Point
100
Price per game
Market Demand
A
Price ( per game)
700 games
B
€40
500 games
C
80
€20
€60
350 games
C
60
B
40
20
A
0
0
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100
200
300
400
500
Quantity (games)
600
700
800

12. Point
100
Price per game
Market Demand
A
Price ( per game)
500 games
€60
350 games
D
60
€40
C
D
700 games
B
80
€20
€80
200 games
C
B
40
A
20
0
0
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100
200
300
400
500
Quantity (games)
600
700
800

13. Point
E
100
Price per game
Market Demand
€40
500 games
€60
350 games
D
€80
200 games
E
60
700 games
C
D
80
€20
B
Price ( per game)
A
€100
100 games
C
B
40
A
20
0
0
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100
200
300
400
500
Quantity (games)
600
700
800

14. An Increase in Demand
Price
P
Dx
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Qx
Q1
Quantity
D1

15. A Decrease in demand
Price
P
D1
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Qx
Q1
Quantity
Dx

16. Factors affecting the demand for a good
The Demand Function
Dx = f ( Px, Pc, Ps, Y, t, E)
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17. The Demand Function

Dx = f ( Px, Pc, Ps, Y, t, E)
Px = Goods which obey and do not obey the
Demand
 Pc = Price of Complimentary Goods
 Ps = Cost of Substitute Goods
 Y = Income
 t = Tastes
 E = Consumers Expectation

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Law of

18. Demand for a good depends on its own price
If price rises quantity falls
If price falls quantity rises
P2
P1
Q2
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Q1
Quantity Demanded

19. Demand for a good depends on its own price
• Complimentary Goods
Goods which are used
jointly. The use of one
involves the use of the other
• Substitute Goods
Goods which satisfy the
same needs and thus can be
considered as alternatives to
each other
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20. Complimentary Goods
D1
D2
An increase in price of a
complementary good causes the
demand for good X to fall
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D2
D1
An fall in price of a complementary
good causes the demand for good X to
rise

21. Substitute Goods
(The Substitute Effect)
D2
D1
An increase in price of a substitute
good causes the demand for good X to
rise
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D1
D2
An fall in price of a substitute good
causes the demand for good X to fall

22. Demand for a good depends on level of
income (The Income Effect)
• Normal Goods
A normal good is a good with a positive income effect. A rise in income causes
more of it to be demanded, while a fall in income causes less of it to be
demanded
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23. Normal Goods
D2
D1
A rise in income causes the demand for
a normal good to increase from D1 to
D2
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D1
D2
An fall in income causes the demand
for a normal good to fall from D1 to
D2

24. Demand Depends on Taste

If the movement in taste is in favour of the good, it causes
an increase in demand, which shifts the demand curve to the
right

If the movement in taste is against the good, it causes a fall
in demand, which shifts the demand curve to the left
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25. Movement in Taste
D2
D1
A movement in taste in favour of a good
causes demand to increase
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D1
D2
A movement in taste against a good
causes demand to fall

26. Demand for a good depends on the
expectations of consumers

Demand for a good will shift to the right if consumers
expect:
1.
2.
3.

The price of good X to be higher in the future
A scarcity of good X in the future
Their incomes to be higher in the future
Demand for a good will shift to the left if consumers
expect:
The price of good X to be lower in the future
2.
A plentiful supply of good X in the future
3.
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1.

27. Consumer Expectations
D2
D1
Demand for Good X will rise if
consumers expect higher future price,
scarcity or higher future incomes
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D1
D2
Demand for Good X will fall if
consumers expect lower future price,
abundance or lower future incomes