Beyond the EU: DORA and NIS 2 Directive's Global Impact
Demand and Elasticity.pptx
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Demand
The quantity of consumers who are willing and able to buy products
at various prices during a given period of time.
The quantity of consumers' desire to acquire the good, the
willingness and ability to pay for it.
Demand Schedule
A tabular arrangement of different prices of a product or service
and its quantity at various prices during a specific period
Law of Demand
It is a fundamental principle which states that there is an inverse
relationship between price and quantity demanded.
A higher price leads to a lower quantity demanded and a lower price
leads to a higher quantity demanded.
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Demand
Determinants of/ Affecting factors of the
Demand
i. Product cost and Consumer’s Taste
ii. The income of the consumers
iii. Costs of related goods and services
iv. Consumer expectation on Income
v. Buyers in the market
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Demand
Individual Demand Curve:
The relationship between the quantity of a product a single
consumer is willing to buy and its price.
( 2 soaps in a month at a price of 80)
Market Demand Curve:
the relationship between the quantity of a product that all
consumers in the market are willing to buy and its price
Example - (25,00,000 soaps in the market at Rs 80)
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Elasticity of Demand
Elasticity
It is a concept in economics that talks about the effect of
change in one economic variable on the other.
Elasticity of Demand
Measures the effect of change in an economic variable
on the quantity demanded of a product. There are
several factors that affect the quantity demanded for a
product such as the income levels of people, price of the
product, price of other etc.
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Types of Elasticity of Demand
I. Price Elasticity of Demand (PED) ...
II. Income Elasticity of Demand (YED) ...
III. Cross Elasticity of Demand (XED)
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1 . Price Elasticity of Demand
Factors affecting Price Elasticity of Demand
1. Nature of Commodity
2. Availability of Close Substitutes
3. Diversity of Uses
4. Income Level of the Buyer
5. Time Horizon
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Importance of Elasticity of Demand
1. Factor Pricing
2. Paradox of Poverty amidst Plenty
3. Decisions of Monopolist
4. Formulation of Government Policies
5. International Trade
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1. Perfectly Elastic Demand:
When a small change in price of a product causes a major
change in its demand ( to the Zero level or Infinite Level)
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2. Perfectly Inelastic Demand:
A perfectly inelastic demand is one when there is no
change produced in the demand of a product with
change in its price.
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3. Relatively Elastic Demand:
if the price of a product increases by 20% and the demand of the product
decreases by 25%, then the demand would be relatively elastic. demand
(ep>1)
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4. Relatively Inelastic Demand:
Percentage change in demand is less than the percentage change in
the price of a product
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5. Unitary Elastic Demand:
When the proportionate change in demand produces the same change in the price
of the product, the demand is referred as unitary elastic demand.
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i. Positive Income Elasticity of Demand
Refers to a situation when the demand for a product increases with
increase in consumer’s income and decreases with decrease in
consumer’s income.
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i. Positive Income Elasticity of Demand
a. Unitary Income Elasticity of Demand
b. More than Unitary Income Elasticity of Demand
c. Less than Unitary Income Elasticity of Demand
ii. Negative Income Elasticity of Demand
iii. Zero Income Elasticity of Demand
a. Unitary Income Elasticity of Demand
proportionate change in the quantity demanded is equal to
proportionate change in income.
For example, if income increases by 50% and demand also rises by
50%,
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i. Positive Income Elasticity of Demand
a. Unitary Income Elasticity of Demand
b. More than Unitary Income Elasticity of Demand
c. Less than Unitary Income Elasticity of Demand
ii. Negative Income Elasticity of Demand
iii. Zero Income Elasticity of Demand
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b. More than Unitary Income Elasticity of Demand
Proportionate change in the quantity demanded is more than
proportionate change in income. For example, if the income
increases by 50% and demand rises by 100%.
the proportionate change in, the quantity demanded is less
than proportionate change in income. For example, if the
income increases by 50% and demand increases only by 25%.
c. Less than Unitary Income Elasticity of Demand:
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ii. Negative Income Elasticity of Demand
the demand for a product decreases with increase in
consumer’s income. The income elasticity of demand is
negative for inferior goods, also known as Giffen goods
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There is no effect of increase in consumer’s income on the
demand of product.
in case of essential goods. For example, salt is demanded in
same quantity by a high income and a low income
individual.
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Significance of Income Elasticity of Demand
i. Helping in investment decisions
ii. Forecasting demand
iii. Categorizing goods
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Changes in Demand
A shift in consumer desire to purchase a particular good or
service, irrespective of a variation in its price.
Due to
a shift in income levels,
consumer tastes, or
a different price being charged for a related product.
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Changes in Demand
Changes in demand include an increase or decrease in demand.
There are two possible changes in demand:
1. Increase (shift to the right) in demand
2. Decrease (shift to the left) in demand
I) Increase in demand (Shift to the Right)
Suppose, the income of the consumer increases. The price of the
product and supply of the product remain the same. Due to an
increase in income of the consumer, the purchasing power of
consumption increases.
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1. Increase (shift to the right) in demand
No change in the price of the product
No change in the supply of product
Income of Consumer is increasing
Demand is increasing
2. Decrease (shift to the left) in Demand
Due to the decrease in income of the consumer,
the purchasing power of the consumer will also decrease
a.No change in the price of the product
b.No change in the supply of product
c.Income of Consumer is decreasing
d.So demand for product decreasing