The document discusses the theory of demand. It defines demand as the quantity of a good that consumers are willing and able to purchase at a given price at a specific time. Demand depends on three factors: willingness to buy, ability to pay, and readiness to spend available money. A demand schedule shows possible demand quantities at different price levels, while a demand curve graphs the relationship between price and quantity demanded. Individual demand curves combine to form a market demand curve. Factors that influence demand include the price of the good, prices of related goods, income, tastes and preferences, future expectations, population size, and income distribution. The relationship between a good's price and demand is inverse - as price increases, quantity demanded decreases.

1. THEORY OF DEMAND
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3. WHAT IS
DEMAND?
• DESIRE – mere wishful thinking – desire to own a
helicopter
• WANT – wish accompanied by ability to pay –
want to buy a refrigerator
• DEMAND – Desire + want + willingness to pay –
buying a chocolate at Rs. 75
• DEMAND – demand for a commodity means
quantity of a good the consumer is willing to and able
to buy at a particular price at a given point of time.
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4. 3 important
factors
Willingness to buy
Ability to pay
Readiness to part with
money available
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6. DEMAND v/s
QUANTITY
DEMANDED
• Possibilities of demand of a
commodity at various price
level. E.g. Dairy Milk at
different price levels and
possible demand is shown in
the above demand schedule
Price
Quantity
demanded
15 30
20 18
25 14
30 8
Price Quantity
20 18
• Final demand of a
commodity at a specific
price level. E.g. 18 Dairy
Milk Chocolates are
purchased at Rs. 20 per
unit.
DEMAND
QUANTITY
DEMANDED
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7. DEMAND SCHEDULE & DEMAND CURVE
(Tabular Presentation of relationship between Price & Demand ) (Graphical Presentation of relationship between Price & Demand )
DEMAND
SCHEDULE
Individual
Demand
Schedule
Market
Demand
Schedule
DEMAND
CURVE
Individual
Demand
Curve
Market
Demand
Curve
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8. INDIVIDUAL DEMAND SCHEDULE &
MARKET DEMAND SCHEDULE
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11. INDIVIDUAL DEMAND & MARKET DEMAND
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12. DERIVATION OF
DEMAND CURVE
PRICE QUANTITY
DEMANDED
9 10
8 15
7 20
6 25
5 30
4 35
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13. SLOPE OF THE DEMAND CURVE
• Slope of the demand curve =−
Δ𝑃
Δ𝑄
= −
𝑎𝑐
𝑏𝑐
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14. DETERMINANTS/FACTORS
AFFECTING
DEMAND/DEMAND
FUNCTION
• INDIVIDUAL DEMAND
FUNCTION
• Dx = f (Px, Pr, Y, T, Fx)
• MARKET
• DEMAND FUNCTION
• Dx = f (Px, Pr, Y, T, Fx, Nb, Dy)
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16. Factors affecting Demand
Price
(Px)
Price of
the
good
and it’s
deman
d are
inversel
y
related
Price of Related
Goods (Pr)
SUBSTITUTEGOODS
COMPLEMENTARY
GOODS
Income of
the
Consumer
(Y)
Taste &
Preference
of the
Consumer
(T)
Future
Expectation
s regarding
price of the
good (Fx)
Population
or
Number of
Buyers (Nb)
Distribution
of Income
(Dy)
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17. Price of the
commodity
Demand for
the
commodity
Price & Demand relation -
• Inversely related / Opposite to each other
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18. RELATED GOODS
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19. •Income of the Consumer • Taste & Preferences of a
Consumer
• Development of Taste for a
particular product increases its
demand and vice-versa. Positive
Relation
• Income & Demand are Positively
related
Income
Demand
Brand/Quality
Demand
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20. FUTURE EXPECTATION regarding PRICE of the Product
Future price to rise
• Positive relation • Positive relation
FuturePrice
CurrentDemand
Future price to fall
FuturePrice
CurrentDemand
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21. Changes in Demand
CHANGE IN QUANTITY
DEMANDED
EXTENSION
Caused due to
Decrease in Price
(other factors
remain constant)
CONTRACTION
Caused due
Increase in Price
(other factors
remain constant)
CHANGE IN
DEMAND
INCREASE
Caused due to-
1. Increase in Income
2. Increase in Price of Substitute goods
3. Decrease in Price of Complementary
goods
4. Expecting future prices to rise
5. Increase in size of consumer group
DECREASE
Decrease in Price
(other factors
remain constant)
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24. THANK YOU
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