demand

1. MODULE II
DEMAND

2. UTILITY
Stanley Jevons
Concept of utility
• Marginal utility
• Total Utility
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3. APPROACHES
1. CARDINAL APPROACH
2. ORDINAL APPROACH
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4. Cardinalapproach/Marshallianutilityanalysis
Alfred Marshall (1890)
Main laws under cardinal Approach
1
Law of Diminishing marginal utility
• Goosen
• Goosen’s first law
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Law of Equi Marginal utility
• Goosen’s second law/ Law of Maximum
satisfaction/ The law of Rational
Consumers/ Law of Economics
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5. LawofDiminishingmarginalutility

6. Ordinal
approach
J R HICKS
1.It explains that the satisfaction cannot
be measured numerically.
2.The ordinal utility is measured in
terms of ranking of preferences of a
commodity when compared to each
other.
3.It is based on indifference curve
analysis.
4.It measures utility subjectively.
5.It is more realistic.
6.It is promoted by modern economists.
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7. DEMAND
DESIRE
PURCHASING POWER AND
WILLINGNESS TO PURCHASE

8. Demand function
Qd X = f (Px , Pr , Y, T, Ey , Ep , Adv….)
Where,
Qd X = quantity demanded of good ‘X’
Px = the price of good X
Pr = the price of a related good
Y = income level of the consumer
T = taste and preference of the consumers
E y = expected income
E p = expected price
Adv = advertisement cost
DeterminantsOfDemand:
• Price of the good
• Price of related goods
• Consumer Income
• Taste, preference, fashions, and habits
• Population
• Money Circulation
• Weather Condition
• Advertisement and Salesmanship
• Consumer’s future price expectation
• Government policy (taxation)
• Multiplicity of uses of goods
• Credit facilities

9. DemandSchedulesandDemandcurve
Demand Schedule
Alfred marshall
Individual
Demand
Schedule
Individual
Demand Curve
Market demand
Schedule
Market demand
Curve
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10. EXCEPTIONAL
DEMANDCURVE10
GIFFEN
GOODS
VEBLEN EFFECT/
CONSPICUOUS
CONSUMPTION
CHANGE
IN
FASHION
NECES
SITIES
IGNORANCE
DEMONST
RATION
EFFECT
EMERG
ENCIES
FUTURE
CHANGE IN
PRICE
SNOB
EFFECT
SPECULA
TIVE/
OUTDATE
D GOODS
GOODS IN
SHORT
SUPPLY

11. 11
MOVEMENT:EXPANSION
ORCONTRACTIONOF
DEMAND
Caused by change in the
price of the goods only

12. 12
SHIFTINDEMAND:
INCREASEINDEMANDAND
DECRESEINDEMAND
Caused by
changes in
factors other
than the price of
the goods

13. Elasticity of
Demand
Price
Elasticity
Income
Elasticity
Cross
Elasticity
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14. Price Elasticity
of demand
The price elasticity of
demand is the percentage
change in the quantity
demanded of a good or a
service, given a percentage
change in its price.
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This Photo by Unknown Author is licensed under CC BY-ND

15. Priceelasticityofdemand
Perfectly elastic
demand (Ed = ∞)
Perfectly inelastic
demand (Ed = 0)
Unitary elastic
demand (Ed = 1)
Relatively elastic
demand (Ed > 1)
Relatively inelastic
demand (Ed < 1)
Presentation title 15

16. Total
Expenditure
Method
Revenue
method
Proportionate
Method or %
Method
Geometric
Method
Arc method
Measurement of Elasticity (Methods)
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17. 17
Total Expenditure
Method
Total Expenditure =
Price per unit ×
Quantity Demanded

18. Proportionate Method/ Flux
method/ Ratio method/
Arithmetic Method/ % Method
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Arcelasticityofdemand/
Averageelasticityofdemand

19. Geometric/ Point Method
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Revenue Method
Mrs. Robinson
Ed = AR/ (AR-MR)

20. Income
Elasticity of
demand
High-income elasticity (ey>1)
Unitary income elasticity (ey=1)
Low-income elasticity (0<ey<1)
Zero income elasticity (ey=0)
Negative income elasticity (ey<1)
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21. Cross Elasticity
of demand
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22. Advertising/
Promotional
Elasticity of
demand
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23. Elasticity of Supply
ΔQs / Qs
Es = ----------------
ΔP / P
ΔQs = change in quantity supplied
Qs = quantity supplied
ΔP = change in price
P = price
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Supply
which a seller is willing and
able to sell at different prices
in a given market at a point of
time, other things remaining
the same.

24. PRICEELASTICITY
OFSUPPLY
 PERFECTLY INELASTIC (ES = 0)
 INELASTIC SUPPLY (ES =0-1)
 UNITARY ELASTIC (ES=1)
 ELASTIC (EX= 1- ∞)
 PERFECTLY ELASTIC (ES=∞)
Kinds Of
Supply
Elasticity
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25. • Thanks
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