This document summarizes key concepts related to the law of demand and Henri Fayol's principles of management. It defines demand, supply, and how the relationship between price and quantity demanded creates the demand curve. It describes factors that cause demand to extend, contract, or shift. It also outlines 14 principles of management developed by Henri Fayol, such as specialization of labor, authority, discipline, and esprit de corps. The document was created by Prasenjit Rathod for a mechanical engineering class and includes his name and others.

1. LAW OF DEMAND
&
PRINCIPLE OF MANAGEMENT
BY
HENRI FAYOL
Made by : Prasenjit Rathod4 MARCH,2015

2. MECHANICAL – C (4th Semester)
 Prasenjit Rathod (130810119133)
 Pavan Patel (130810119117)
 Nirmal Patel (130810119114)
 Sidhraj Vaghela (130810119158)
 Ketan Tank (130810119149)
4 MARCH,2015

3. Theory of Demand
 Supply and Demand is perhaps one of the most
fundamental concepts of economics and it is the
backbone of a market economy. Demand refers to
how much (Quantity) of a product or service or
desired by buyers. The quantity demanded is the
amount of a product people are willing to buy at a
certain price; the relationship between price and
quantity demanded is known as the demand
relationship.
4 MARCH,2015

4. Theory of Demand
 Supply represents how much the market can offer.
The quantity supplied refers to the amount of a
certain good producers are willing to supply when
receiving a certain price. The correlation between
price and how much of a good service is supplied to
the market is known as the supply relationship. Price,
therefore, is a reflection of supply and demand.
 The relationship between demand and supply
underline the forces behind the allocation of
resources in the most efficient way possible.
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5. Law of Demand
 The law of demand states that, if all other factors remain
equal, the higher the price of a good, the less people will
demand that good. In other words, the higher the price, the
lower the quantity demanded. The amount of a good that buyers
purchase at a higher price is less because as the price of a good
goes up, so does the opportunity cost of buying that good. As a
result, people will naturally avoid buying a product that will
force them to forgo the consumption of something else they
value more.
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6. Law of Demand
 A, B and C are points on the demand
curve. Each point on the curve
reflects a direct correlation
between quantity demanded (Q) and
price (P). So, at point A, the
quantity demanded will be Q1 and
the price will be P1, and so on. The
demand relationship curve
illustrates the negative relationship
between price and quantity
demanded. The higher the price of a
goo the lower the quantity
demanded (A), and the lower the
price, the more the good will be in
demand (C).
A
B
C
Price(S)
Quantity
Demand
Relationship
Demand
(D)
P
1
P2
P3
Q2 Q3Q1
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7. Changes in Demand
 Demand of a commodity may change. It may increase or
decrease due to changes certain factors. These factors are
called determinants of demand. These factors include;
1) Price of a commodity
2) Nature of a commodity
3) Income and wealth of consumer
4) Taste and preferences of consumer
5) Price of related goods (substitutes and compliment goods)
6) Consumers expectations.
7) Advertisement etc…
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8. o Demand Function
 There is a functional relationship between demand and its
various determinants. I.e., a change in any determinant will
affect the demand. When this relationship expressed
mathematically, it is called Demand Function. Demand function
of a commodity can be written as follows:
D = f (P, Y, T, Ps, U)
Where, D = Quantity demanded
P = Price of the commodity
Y = Income of the consumer
T = Taste and preference of consumers.
Ps= Price of substitutes
U = Consumers expectations & others
f = Functions of (indicates how variables are related)
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9. Extension and Contraction of Demand
a
b
c
Price(S)
Q
Contraction
Extension
P
1
P
P1
Q Q2Q1
• Demand may change due to
various factors. The change in
demand due to change in price
only, where other factors
remaining constant, it is called
extension and contraction of
demand. A change in demand solely
due to change in price is called
extension and contraction.
D
D
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10. •Shift in Demand (Increase or Decrease in demand)
• When the demand changes
due to changes in other
factors, like taste and
preference, income, price
of related goods etc…, it is
called shift in Demand.
• Due to changes in other
factors, if the consumers
buy more goods, it is called
increase in demand or
upward shift. On the other
hand, if the consumers buy
fewer goods due to change
in other factors, it is called
downward shift or
decrease in demand.D2
D
1
D
Price
(P)
O
Quantity
D1
D
P1
M NL
X
D2
4 MARCH,2015

11. Comparison between extension/contraction
and shift in demand
1. Demand is varying due to
changes in
2. Other factors like taste,
preferences, income etc…
remaining the same
3. Consumer moves along the
same demand curve
1. Price Demand is varying
due to changes in other
factors
2. Price of commodity remain
the same
3. Consumer may moves to
higher or lower demand
curve
Extension/Contraction of
Demand Shift in Demand
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12. Different types of demand
 Joint demand :
 When two or more commodities are jointly demanded at the
same time to satisfy a particular want, it is called joint or
complimentary demand. (demand for milk, sugar, tea for
making tea).
 Composite demand:
 The demand for a commodity which can be put for several
uses (demand for electricity)
4 MARCH,2015

13. Different types of demand
 Direct and Derived demand:
 Demand for a commodity which is for a direct consumption is
called direct demand.(food, cloth). When the commodity is
demanded as a result of the demand of another commodity, it
is called derived demand.(demand for tires depends on
demand of vehicles).
 Industry demand and company demand:
 Demand for the product of particular company is company
demand and total demand for the products of particular
industry which includes number of companies is called
industry demand
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14. Determinants of Demand
I. Change in consumer taste
II. Change in the number of buyers
III. Change in consumer incomes
IV. Change in the price of complementary and
substitute goods
V. Change in consumer expectations
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15. Henri Fayol
 First came up with the five basic functions of
management—Planning, Organizing, Staffing,
Directing, Communicating, and Controlling
 First wrote that management is a set of
principles which can be learned.
 Developed Fourteen Principles of
Management
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16. HENRI FAYOL’s
FOURTEEN PRINCIPLES OF
MANAGEMENT
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17. 1. Specialization of labor.
Specializing encourages continuous
improvement in skills and the development of
improvements in methods.
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18. 2. Authority.
The right to give orders and the power
to exact obedience.
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19. 3. Discipline.
No slacking, bending of rules.
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20. 4. Unity of command.
Each employee has one and only one
boss.
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21. 5. Unity of direction.
A single mind generates a single plan and
all play their part in that plan.
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22. 6. Subordination of Individual Interests.
When at work, only work things should be
pursued or thought about.
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23. 7. Remuneration.
Employees receive fair payment for
services, not what the company can get away with.
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24. 8. Centralization.
Consolidation of management functions.
Decisions are made from the top.
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25. 9. Scalar Chain (line of authority).
Formal chain of command running from top
to bottom of the organization, like military
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26. 10. Order.
All materials and personnel have a
prescribed place, and they must remain there.
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27. 11. Equity.
Equality of treatment (but not necessarily
identical treatment)
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28. 12. Personnel Tenure.
Limited turnover of personnel. Lifetime
employment for good workers.
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29. 13. Initiative.
Thinking out a plan and do what it takes to
make it happen.
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30. 14. Esprit de corps.
Harmony, cohesion among personnel.
4 MARCH,2015