The document provides an overview of demand in economics, defining it as the quantity of a commodity consumers are willing to purchase at a specific price over a period. It discusses various determinants of demand, including price, consumer income, tastes, and preferences, along with exceptions to the law of demand such as Giffen and Veblen goods. The concluding remarks highlight the importance of understanding demand for both consumers, to optimize resource allocation, and producers, to align production with market needs.

1. BUSSINESS
ECONOMICS
BBA
SUBMITTED TO:- PRABHEET KAUR
MA’aM
SUBMITTED BY:-
PRASHANT KUMAR
24345078
STUDENT OF BBA
SEC [B]

2. DEMAND
AND IT,S
DETERMINANTS

3. WHAT IS DEMAND ???
DEMAND is the amount of a commodity that a consumer is willing to
purchase or is ready
to purchase from market at a given price during a given period of time.
In other words, demand refers to the quantity of a commodity which a
consumer or household is willing to buy from the market at a particular
price during a particular period of time.
MARKET DEMAND
Market Demand refers to the total quantity of a commodity that all the
consumers or households are willing to buy at a given price within a
given period of time.

4. DEMAND CURVE
In economics, the demand curve is
the graph depicting the
relationship between the price of a
certain commodity and the
amount of it that consumers are
willing and able to purchase at
that given price. It is a graphic
representation of a demand
schedule.
The demand curve for all
consumers together follows from
the demand curve of every
individual consumer: the
individual demands at each price
are added together.
Price
(Rs)
Q.D (units)

5. LAW OF DEMAND
In economics, the law of demand states that, all else being
equal, as the price of a product increases ( ), quantity
↑
demanded falls ( ); likewise, as the price of a product
↓
decreases ( ), quantity demanded increases ( ).
↓ ↑
In simple words, law of demand means inverse relationship
between price and quantity of demand. There is a negative
relationship between the quantity demanded of a good and its
price. The factors held constant in this relationship are the
prices of other goods and the consumer's income.
There are, however, some possible exceptions to the law of
demand

6. Exceptions Of Law Of Demand
Generally the amount demanded of a good increases with a decrease in price of the good
and vice versa. In some cases, however, this may not be true. There are certain goods
which do not follow this law. These include Veblen goods and Giffen goods. Further
exception and details are given below.
GIFFEN GOODS
A Giffen good describes an inferior good that as the price increases, demand for the
product increases. As an example, during the Irish Potato Famine of the 19th century,
potatoes were considered a Giffen good. Potatoes were the largest staple in the Irish diet, so
as the price rose it had a large impact on income. People responded by cutting out on
luxury goods such as meat and vegetables, and instead bought more potatoes. Therefore,
as the price of potatoes increased, so did the quantity demanded.

7. Expectation of change in the price of commodity
If an increase in the price of a commodity causes households to expect the price of a
commodity to increase further, they may start purchasing a greater amount of
the commodity even at the presently increased price. Similarly, if the household
expects the price of the commodity to decrease, it may postpone its purchases.
Thus, some argue that the law of demand is violated in such cases.
Basic or necessary goods
The goods which people need no matter how high the price is are basic or
necessary goods. Medicines covered by insurance are a good example. An
increase or decrease in the price of such a good does not affect its quantity
demanded

8. DETERMINANTS
OF
DEMAND

9. INTRODUCTION
The demand of a product is influenced by a number of factors.
An organization should properly understand the relationship between the
demand and its each determinant to analyse and estimate the individual
and market demand of a product
The demand for a product is influenced by various factors, such as price,
consumer’s income, and growth of population.
For example, the demand for apparel changes with change in fashion and
tastes and preferences of consumers. The extent to which these factors
influence demand depends on the nature of a product.
An organization, while analysing the effect of one particular determinant
on demand, needs to assume other determinants to be constant. This is due
to the fact that if all the determinants are allowed to differ simultaneously,
then it would be difficult to estimate the extent of change in demand.

10. 1. PRICE OF A PRODUCT OR A SERVICE
Affects the demand of a product to a large
extent. There is an inverse relationship
between the price of a product and
quantity demanded. The demand for a
product decreases with increase in its
price, while other factors are constant, and
vice versa.
For example, consumers prefer to purchase a
product in a large quantity when the price
of the product is less. The price-demand
relationship marks a significant
contribution in oligopolistic market where
the success of an organization depends on
the result of price war between the
organization and its competitors.

11. 2. INCOME OF THE CONSUMER
Constitutes one of the important determinants of demand.
The income of a consumer affects his/her purchasing power,
which, in turn, influences the demand for a product.
Increase in the income of a consumer would automatically
increase the demand for products by him/her, while other
factors are at constant, and vice versa.
For example, if the salary of Mr. X increases, then he may
increase the pocket money of his children and buy luxury
items for his family. This would increase the demand of
different products from a single family. The income-
demand relationship can be analysed by grouping goods
into four categories, namely, essential consumer goods,
inferior goods, normal goods, and luxury goods.

12. The relationship between the income of a consumer and
each of these goods is explained as follows:
a.Essential or Basic Consumer Goods:
Refer to goods that are consumed by all the people in the society. For
example, food grains, soaps, oil, cooking fuel, and clothes. The
quantity demanded for basic consumer goods increases with increase
in the income of a consumer, but up to a fixed limit, while other
factors are constant.
b. Normal Goods:
Refer to goods whose demand increases with increase in the
consumer’s income. For example, goods, such as clothing, vehicles,
and food items, are demanded in relatively increasing quantity with
increase in consumer’s income. The demand for normal goods varies
due to .different rate of increase in consumers’ income.

13. c. Inferior Goods:
Refer to goods whose demand decreases with increase in the income of
consumers. For example, a consumer would prefer to purchase wheat and
rice instead of millet and cooking gas instead of kerosene, with increase
in his/her income. In such a case, millet and kerosene are inferior goods
for the consumer.
However, these two goods can be normal goods for people having lower
level of income. Therefore, we can say that goods are not always inferior
or normal; it is the level of income of consumers and their perception
about the need of goods.
d. Luxury Goods:
Refer to goods whose demand increases with increase in consumer’s
income. Luxury goods are used for the pleasure and esteem of
consumers. For example, expensive jewellery items, luxury cars, antique
paintings and wines, and air travelling.

14. 3. Tastes and Preferences of Consumers
Play a major role in influencing the individual and market demand of a product.
The tastes and preferences of consumers are affected due to various factors, such as
life styles, customs, common habits, and change in fashion, standard of living,
religious values, age, and sex.
A change in any of these factors leads to change in the tastes and preferences of
consumers. Consequently, consumers reduce the consumption of old products and
add new products for their consumption. For example, if there is change in fashion,
consumers would prefer new and advanced products over old- fashioned products,
provided differences in prices are proportionate to their income.

15. 4. Price of Related Goods
Refer to the fact that the demand for a specific product is influenced by the price
of related goods to a greater extent.
Related goods can be of two types, namely, substitutes and complementary
goods, which are explained as follows:
a. Substitutes:
Refer to goods that satisfy the same
need of consumers but at a different
price. For example, tea and coffee, jowar
and bajra, and groundnut oil and
sunflower oil are substitute to each other.
The increase in the price of a good
results in increase in the demand of its
substitute with low price. Therefore,
consumers usually prefer to purchase a
substitute, if the price of a particular
good gets increased.
b. Complementary Goods:
Refer to goods that are consumed
simultaneously or in combination.
In other words, complementary
goods are consumed together. For
example, pen and ink, car and
petrol, and tea and sugar are used
together. Therefore, the demand for
complementary goods changes
simultaneously. The
complementary goods are inversely
related to each other. For example,
increase in the prices of petrol would
decrease the demand of cars.

16. 5. Expectations of Consumers
Imply that expectations of consumers about future changes in the price
of a product affect the demand for that product in the short run. For
example, if consumers expect that the prices of petrol would rise in the
next week, then the demand of petrol would increase in the present.
On the other hand, consumers would delay the purchase of products
whose prices are expected to be decreased in future, especially in case of
non-essential products.
Apart from this, if consumers anticipate an increase in their income,
this would result in increase in demand for certain products. Moreover,
the scarcity of specific products in future would also lead to increase in
their demand in present.

17. 6. Effect of Advertisements
Refers to one of the important factors of determining the demand for a product.
Effective advertisements are helpful in many ways, such as catching the attention
of consumers, informing them about the availability of a product, demonstrating
the features of the product to potential consumers, and persuading them to purchase
the product. Consumers are highly sensitive about advertisements as sometimes
they get attached to advertisements endorsed by their favourite celebrities. This
results in the increase demand for a product.
7. Growth of Population
Acts as a crucial factor that affect the market demand of a product. If the
number of consumers increases in the market, the consumption capacity of
consumers would also increase. Therefore, high growth of population would
result in the increase in the demand for different products.

18. 8. Distribution of Income in the
Society
Influences the demand for a product in the market to a large extent. If income
is equally distributed among people in the society, the demand for products
would be higher than in case of unequal distribution of income.
However, the distribution of income in the society varies widely.
This leads to the high or low consumption of a product by different segments of
the society. For example, the high income segment of the society would prefer
luxury goods, while the low income segment would prefer necessary goods. In
such a scenario, demand for luxury goods would increase in the high income
segment, whereas demand for necessity goods would increase in the low income
segment.

19. CONCLUSION
The study of demand is highly essential in today’s scenario, both
for the consumers and the producers.
For consumers it’s necessary as through this they are able to know
the worth of the product they are willing to buy, hence, helps them to
attain an equilibrium using their resources more efficiently.
For producers it’s important because through they can produce
according to the demand and price of the product in the market, cope
up to the changing taste and preferences of the consumers, hence,
helps in achieving producers’ equilibrium by making maximum
profit (or minimizing loss).

20. THANK YOU