This document provides an overview of managerial economics and the demand function. It defines demand as the quantity of a commodity that consumers are willing and able to purchase at a given price. The law of demand states that, all else equal, demand increases as price decreases and decreases as price increases. A demand curve is downward sloping to represent this relationship. Elasticity of demand measures the responsiveness of quantity demanded to changes in price and other determinants of demand. There are different types of elasticity including perfectly inelastic, unitary, and perfectly elastic demand. The document also discusses factors that influence demand and exceptions to the law of demand.

1. Managerial Economics
Demand Function
Presented By - Jesson Heppolette
MBA 1
Roll No -23

2. Introduction
Demand for a particular commodity refers to the
commodity which an individual consumer or household
is willing to purchase per unit of time at
a particular price.
• Demand for a particular commodity implies:
Desire of the customer to buy the product;
The customers willingness to buy the product;
Sufficient purchasing power in the customers
possession to
buy the product.
• The demand for a particular commodity by an
individual consumer or household is known as
Individual
Individual demand for the commodity and
demand for the Summation of the individual
demand is known as Market Demand

3. DEMAND ANALYSIS
Law of demand expresses
the relationship between the
Quantity demanded and the
Price of the Commodity
01
The law of demands states
that,
"Ceteris Paribus, (other
things remaining constant)
the lower the price of a
commodity the larger the
quantity demanded of it and
vice versa”.
02
In simple terms other things
remain
if the price of the commodity
increases, the demand will
decrease and if the price of
the commodity decreases, the
demand will increase
03
The Law of Demand

4. No change in customs, habit,
quality Of Goods No change in substitute
products, related products
and the price of the Product
THREE
ONE
Income of the consumer is
constant.
FOUR
TWO
Assumptions
No change in taste and
preference..
FIVE
No Complementary Goods.

5. Demand Curve
Price
Quantity

6. Reasons for the Downward Sloping Demand Curve
● According to the law of demand there exists a opposite relationship between the PRICE and the
QUANTITY DEMANDED, and that is why demand curve is downward sloping.
The various other reasons for this downwards sloping of demand curves are
as follows:
● Law of Diminishing Marginal Utility and Equi-Marginal utility.
● Price Effect
● Income Effect
● Substitution Effect

7. IMPORTANCE OF LAW OF DEMAND IN
ECONOMICS
There are several advantages of the law of demand, providing the opportunity for the
traders, consumers, and other related parties. Some of the advantages are as follows:
● It helps the party selling the different goods fix the prices of their sold
commodities. It will let them know that if they increase or decrease the demand
prices, what will be its corresponding effect on the quantity that its customers will
demand.
● The study of the law of demand in economics is of great importance to the finance
minister of every country as the change in the rate of tax will change the prices of
the different commodities, thereby affecting its demand in the market.

8. Exceptions Of Law Of Demand
In certain cases the slope of Demand Curve is upward i.e. positively sloped, it is known as the
exceptions of Law of Demand.
The Exceptions are as follows…
● Giffen Goods (Giffen Paradox)
● Emergency (War etc...)
● Conspicuous necessities (Car, Fancy Cloths etc...) and Conspicuous Consumption (Fancy
Diamonds,
● High price shoes, pens etc...)
● Depression ( Price and quantity demand is low)
● Ignorance Effect (High priced commodity is better in quality)
● Speculation (Future change in price)

9. FACTORS DETERMINING DEMAND
1.Price of the product Taste
and Preference
2.Income
3.Prices of the related goods
01
1. Consumer's Expectation of
future price.
2. Consumer's Expectation of
future income.
02
1.Population
2. Social, Economic &
Demographic distribution of
Customers
03
General Factors Additional Factors: (Luxury Goods &
Durables)
Additional Factors: ( Market Demand)

10. ELASTICITY OF DEMAND
Elasticity of demand is defined as the percentage change in quantity demanded caused
one percent change in each of the determinants under consideration while the other
determinants ar held constant.
Ed = % change in quantity demanded / % change in the determinant.
Ed= ΔQ/ΔP *P/Q
Here, Δ is The Change In Variables

11. Unit Elastic Demand
In this - The change in
Demand is equal to the
change in Price but in the
opposite direction.
Elasticity More than Unity
In this- The change in
Demand will be more than
the change in Price.
THREE
ONE
Perfectly Inelastic Demand
In this- The demand remains
the same even if there is a
huge change in a price.
FOUR
TWO
Types of Elasticity Of Demand
Perfectly Elastic Demand
In this - if Price increases by 1
unit or even there is a small
change in the price, then you
completely stop purchasing
the product.
FIVE
Elasticity Less Than Unity
In this- The Change in Demand will be less than the change in Price.

12. 1. Perfectly Elastic Demand
Demand
Price
P
Ed= ∞

13. 2. Perfectly InElastic Demand
Demand
Price
P
Ed=0
P1

14. 3. Unitary Elastic Demand
Demand
Price
Ed= 1

15. 4. Elasticity More Than Unity
Demand
Price
Ed> 1
QQ1>PP1
P1
P
Q1 Q

16. 5. Elasticity Less Than Unity
Demand
Price
Ed< 1
PP1>QQ1
P1
P
Q1 Q

17. FACTORS AFFECTING THE
ELASTICITY OF DEMAND
1. Nature of the product
2. Availability of the substitute product
3. Uses of the commodity
4. Income Levels
5. Proportion of Income spent
6. Postpone consumption
7. Price levels
8. Time period
9. Durability
10. Taste & Preferences
11. Advertisement
12. Special Demand (Medicine)
13. Complementary Goods
14. Expectation of the future price etc...
Ed= ΔQ/ΔP *P/Q

18. Thank You 😊