Demand Class 11 Economics by Palak Gupta

1. Law Of Demand

2. Assumptions
Price of Substitute goods do not change.
Price of Complementary goods remain
constant.
Inocme of the consumer remains same.
There is no expectation of change in price in
the future.
Tastes and Preferences of the consumer
remains the same.

3. qq
Meaning
Price of Quantity
product demanded
increases or decreases or
decreases increases
Other resp.
factors
remain
constant

4. Important Facts
Inverse Qualitative,
Relationship Not Quantitative
Price ∝ Quantity ✓Change in amount
demanded
No Proportional One-Sided
Relationship It only tells the effect
Px falls qty demanded of change in Px on qty.
by 10% dec. in any prop. demanded.

5. Reasons
1) Law of Diminishing Marginal Utility
2) Substitution Effect
3) Income Effect
4)Additional Customers
5) Different Uses

6. Exceptions 1) Goods of Ostenation
2) Giffen Goods
3)Fear of Shortage
4) Ignorance
5) Fashion related goods
6) Necessities of Life
7)Changes in weather

7. Individual vs Market Demand
Individual Demand
 Quantity demanded of a
commodity by an individual
at a given price at a given
period of time.
 May or may not follow the
Law of Demand.
 Not affected by all the
factors affecting market
demand.
Market Demand
 Quantity demanded of a
commodity by an individual
at a given price at a given
period of time.
 Always follow the Law of
Demand
 Affected by all the
factors affecting individual
demand.

8. Movement Along The
Demand Curve

9. Change in quantity
demanded
occurs due to
Leads to
Change in Price
Movement along the
demand curve
Upward Movt.Downward Movt.

10. Expansion vs Contraction in
Demand
Expasion in Demand
 Rise in quantity demand3d
due to fall in the price of
the commodity, other
factors remaining constant.
 It leads to downward
movement along the same
demand curve.
 It is also known as
“Increase in Quantity
demanded” or “Extension in
Demand”.
Contraction in Demand
 Fall in quantity demand3d
due to rise in the price of
the commodity, other
factors remaining constant.
 It leads to an upward
movement along the same
demand curve.
 It is also known as
“Decrease in Quantity
demanded”.

12. Shift in Demand Curve

13. Reasons
Change in Price Of
Substitute Goods
Complementary Goods
 Change in income of
consumers
 Change in Tastes and
Preferences
 Change in Population
Expectation of
change in price in
future
Change in distribution
of income
Change in season and
weather

14. Change in Demand
Occurs due to
Leads to
Change in Factors Other than Price
Shift in Demand Curve
Rightward Shift
(Increase in Demand)
Leftward Shift
(Decrease in Demand)

15. Increase vs Decrease in
Demand
Increase in Demand
 Increase in Demand refers
to a rise in the demand of a
commodity caused due to
any factor other than the
own price of the
commodity.
 Demand rises at the same
price or demand remains
same even at higher prices.
 This leads to Rightward
Shift in Demand Curve.
Decrease in Demand
 Decrease in Demand refers
to a fall in the demand of a
commodity caused due to
any factor other than the
own price of the
commodity.
 Demand falls at the same
price or demand remains
same even at lower prices.
 This leads to Leftward
Shift in Demand Curve.

17. Substitute Goods
Substitute goods are those goods which can be
used in place of the one another for
satisfaction of a particular want.
Example: Tea and Coffee

18. Complementary
GoodsComplemenatry goods are those goods which
are used to together to satisfy a particular
want.
Example: Tea and Sugar

19. Substitute vs
Complementary Goods
Substitute good
 Used in place of one
another to satisfy a
particular want.
 They have competitive
demand.
 Price of one substitute
good has positive
relationship with quantity
demanded of another
substitute good.
 Example: Coke and Pepsi
Complementary good
 Used together to satisfy a
particular want.
 They have joint demand.
 Price of a complementary
good has negative
relationship with quantity
demanded of another
complementary good.
 Example: Car and Petrol

20. Normal Goods
Normal Goods refers to those goods whose
demand increases with an increase in income.
Example: If the demand for TV increases
with a rise in income, then TV will be called a
normal good.
Income effect is
positive in case of
a normal good.

21. Inferior Goods
Inferior Goods refers to those goods whose
demand decreases with an increase in income.
Example: If the income of a consumer rises and
he prefers to replace his B/W TV with a
coloured one, then demand for B/W TV will
fall.Then the B/W TV will be an inferior good.
Income effect is
negative in case of
an inferior good.

22. Normal vs Inferior Goods
Normal good
 Normal Goods refer to
those goods whose demand
increases with an increase
in income.
 Income effect is positive in
case of normal goods.
 There is a direct relation
between income and
demand for normal goods.
 “Full Cream Milk” is a
normal good if its demand
increases with an increase
in income.
Inferior good
 Inferior Goods refer to
those goods whose demand
decreases with a increase
in income.
 Income effect is negative
in case of inferior goods.
 There is an inverse relation
between income and
demand for inferior goods.
 “Toned Milk” is an inferior
good if its demand
decreases with an increase
in income.