The document discusses demand, defining it as the relationship between price and the quantity consumers are willing to buy. It covers aspects such as demand schedules, determinants, the law of demand, types of demand (price, income, and cross demand), and elasticity of demand. The text further explains concepts like substitution and income effects, types of goods, and different approaches to consumer demand analysis.

1. DemandAnalysis
Presented By-
Ninad Jadhav (14014)
Bhaskar Kaule (14022)
Harshal Jadhav (14001)
Shubham Chaudhari (14005)

2. 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.
• Demand = Desire + Ability to pay +
Willingness to spend.

3. 3 aspects of Demand
1. It is the Quantity desired at a given
price.
2. It is the demand at a Price during a
given time.
3. It is the quantity demanded per unit of
Time.

4. Demand Schedule and Curve
• Demand curve:
• A curve showing the
relation between the price
of a good and quantity
demanded during a given
period, other things
constant.
• Suppose we are making
pizza.

5. Determinants of Demand
• Price of the goods.
• Income of the buyer.
• Prices of related goods.
• Tastes of the buyer.
• Seasons prevailing at the time of purchase.
• Fashion.
• Advertisement and sales promotion.
• Demonstration effect.

6. Law of Demand
• A quantity of a good demanded during a given
period relates inversely to its price, other
things constant.
• Price increases  Quantity Demanded
decreases.
• Price decreases  Quantity demanded
increases.
• Creates a downward sloping demand curve.

7. Reasons for the Law of
Demand
• Substitution Effect
• Unlimited wants/scarce resources
• When the price of a good falls,
consumers substitute that good for
other goods, which become relatively
more expensive.
• Reverse also holds true.

8. Reasons for the Law of
Demand
• Income Effect
• Money income: Is simply the number
of dollars received per period.
• Real income: Your income measured in
terms of what it can buy.
• A fall in the price of a good increases
consumers’ real income making
consumers more able to purchase
goods; for a normal good, the quantity
demanded increases.

9. Exceptions to the Law of
Demand
• Giffen Goods – Inferior Goods.
• Conspicuous Goods- Esteem Goods.
• Future expectations about prices.
• Irrational Consumers.
• Ignorance or Unawareness of Price.

10. Types of Demand
Price Demand
Income Demand
Cross Demand
 Substitute Goods
 Complementary Goods

11. Price Demand
• It refers to the various quantities of the goods
which consumers will purchase at a given time
and at certain hypothetical prices assuming
that other conditions remains the same.
• We are generally concerned with price
demand only.

12. Income Demand
• Income demand refers to the various
quantities of a commodity that a consumer
would buy at a given time at a various levels of
income. Generally, when income increases,
demand increases and vice-a-versa.

13. Cross Demand
• When the demand of one commodity is related
with the price of the other commodity is called
cross demand.
• The commodity may be substitute or
complementary.

14. Substitute Goods
• Substitute goods are those goods which can be
used in case of each other.
• In such case demand and price are positively
related.
• E.g. :- Tea or Coffee; McDonalds or Burger
king; Nirma or Tide.

15. Complementary Goods
• Complementary goods are those goods which
are jointly used to satisfy a want.
• Complementary goods are those which are
incomplete without each other.
• These are things that go together, often used
simultaneously.
• E.g. :- Car & Petrol; Chassis & Tyre ; Samosa &
Chutney.

16. Change in Demand
Expansion Contraction
Increase Decrease

17. Elasticity of demand
• Elasticity of demand is the degree of responsiveness of
demand to the changes in its determinants.
A. Price Elasticity of Demand
The extent of response of demand for a commodity
to the changes in its prices, other determinants of the
demand remaining constant is called price elasticity of
demand.
%change in quality
%change in product

18. Types of Price Elasticity
of Demand
• Perfectly elastic demand
• Perfectly inelastic demand
• Relatively elastic demand
• Relatively inelastic demand
• Unitary elastic demand

19. Perfectly Elastic Demand
 Perfectly elastic demand is said to happen
when a little change in price leads to an
infinite change in quantity demanded.

20. Perfectly Inelastic Demand
 Perfectly inelastic demand is opposite to
perfectly elastic demand.
 Under the perfectly inelastic demand,
irrespective of any rise or fall in price of a
commodity, the quantity demanded remains
the same.

21. Unitary Elastic Demand
 The demand is said to be unitary elastic when
a given proportionate change in the price level
brings about an equal proportionate change
in quantity demanded. The numerical value of
Unitary elastic demand is exactly one i.e. Ed=1
 Marshall calls it unit elasticity.

22. Relative Elastic Demand
 Relative elastic demand refers to a situation in
which a small change in price leads to a big
change in quantity demanded.
 In such a case elasticity of demand is said to be
more than one
 Ed>1

23. Relative Inelastic Demand
 Under the relatively inelastic demand a given
percentage change in price produces.
 A relatively less percentage change in quantity
demanded.
 Ed<1

24. B . Income Elasticity of demand
The degree of responsiveness of demand for a
commodity to the changes in the consumers income is
known as income elasticity of demand.
% change in quality
% change in income
Types of Income elasticity:
o Negative income elasticity
o Positive income elasticity
o Zero income elasticity

25. C . Cross Elasticity of Demand
The degree of responsiveness of demand for a
commodity to a given change in the price of some other
related commodity is known as cross elasticity of
demand.
% change in quality x
% change in price y

26. Basis of Individual Demand
Utility
• From the commodity point of view
• From Consumer point of view
Approaches to Consumer Demand Analysis
Cardinal Utility approach
• Total Utility
• Marginal Utility
• Law of Diminishing Marginal Utility

27. Assumptions underlying Cardinality Approach
• Limited money income
• Maximisation of satisfaction
• Utility is Cardinal measurable
• Diminishing Marginal Utility
• Constant marginal utility of money
Consumer's equilibrium
• One commodity model
• Multiple commodity model-THE LAW OF
EQUIMARGINAL UTILITY.

28. Ordinal Utility Approach
Assumptions underlying Ordinal approach
• Ordinal utility
• Transitivity & consistency in choice
• Diminishing marginal rate of substitution
 Marginal rate of substitution-MRS is the rate at which
one commodity can be substituted for another , the level of
satisfaction remaining the same.
 Diminishing MRS-The quantity of a commodity that a
consumer is willing to sacrifice for an additional unit of
another goes on decreasing when he goes on substituting
one commodity for another.

29.  Indifferent Curve – Indifferent curve is a locus of points,
each representing a different combination of two substitute
goods ,which yields the same level of utility or satisfaction
to the consumer.
 Properties of Indifferent curve
• IC have a negative curve
• IC are convex to origin
• IC does not intersect with each other
• IC are not tangent to one another
• Upper IC always indicate a higher level of satisfaction
• IC will not touch X-Y axis.

30. Thank You…