B.Com Semester-1 Lecture-1 Demand and Consumer Behaviour

1. MOOCS
Course Name: B.Com Semester: One
Session: 2018-19
Paper- GE 1.1 Chg
Module I
Microeconomics I
Heramba Chandra College
University of Calcutta
Dr. Subir Maitra
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, Guest Faculty, Department of Commerce, University of Calcutta, subirmaitra.wixsite.com/moocs 1

2. Unit-I Demand and Consumer Behaviour
 Concept of demand
 Demand function
 Law of demand
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, Guest Faculty, Department of Commerce, University of Calcutta, subirmaitra.wixsite.com/moocs 2

3. Importance of the Concept of Demand
 Demand is one of the most important decision-
making variables in a market economy.
 In today’s market economy, consumers decide
the size and pattern of the market.
 The future of a producer is dependent on
consumers’ demand.
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, Guest Faculty, Department of Commerce, University of Calcutta, subirmaitra.wixsite.com/moocs 3
(i.e. Why should we know about demand?)

4. Importance of the Concept of Demand
 A producer’s desire to maximise profit may not get
fulfilled unless the producer makes a correct
assessment of market demand for its product.
 Thus, the survival and the growth of any business
enterprise depends upon the proper analysis of
demand for its product in the market.
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, Guest Faculty, Department of Commerce, University of Calcutta, subirmaitra.wixsite.com/moocs 4

5. Importance of the Concept of Demand
 The short term and long-term decisions of the
management depend upon the trends in demand for
the product.
 The reasons behind a rise or fall in demand for a
product are to be to analysed and based on that
certain changes such as, revised production plans,
technology or change in advertisement, packaging,
quality etc. are to be implemented.
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, Guest Faculty, Department of Commerce, University of Calcutta, subirmaitra.wixsite.com/moocs 5

6. What is Market?
 A market is an institutional arrangement under which buyers
and sellers can exchange some quantity of a good or service at
a mutually agreeable price.
 In other words, a market is a mechanism by which buyers and
sellers interact to determine the price and quantity of a good
or service.
 Those who purchase commodities or services in the market
are known as buyers or demanders and those who sell these
are called sellers or suppliers.
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, Guest Faculty, Department of Commerce, University of Calcutta, subirmaitra.wixsite.com/moocs 6

7. What is Demand?
 Demand can be defined as the desire for a good
backed by adequate purchasing power.
 In other words, demand is a desire of an individual for
a good, supported by her ability and willingness to pay.
 Mere desire for a commodity without sufficient
purchasing power does not constitute demand for it.
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, Guest Faculty, Department of Commerce, University of Calcutta, subirmaitra.wixsite.com/moocs 7

8. What is Demand?
 For example, a poor woman who hardly makes both ends
meet may have a desire to own a residential housing, but
surely she does not possess enough resources to fulfill her
desire.
 Therefore, her desire would not be treated as demand.
 A desire accompanied by ability and willingness to pay
makes a real or effective demand.
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, Guest Faculty, Department of Commerce, University of Calcutta, subirmaitra.wixsite.com/moocs 8

9. Demand Function
 The demand function is a mathematical relation between the quantity
demanded of a commodity and the factors affecting demand. The general
form of the demand function is:
Qd = F( P, M, P’, T, O)
where Qd = Quantity demanded of the commodity;
P = Price of the commodity;
M = Money income of the individual;
P’ = Prices of the related commodities;
T = Tastes and preferences of the individual;
O= Other factors (including individual’s expectations,
demonstration effect)
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, Guest Faculty, Department of Commerce, University of Calcutta, subirmaitra.wixsite.com/moocs 9

10. Demand Function
 The demand function states that quantity demanded of a commodity depends
on price of the commodity, money income of the individual, prices of the
related commodities, tastes and preferences of the individual and other
factors (including individual’s expectations, demonstration effect).
 The general form of the demand function can be transformed into ‘ceteris
paribus demand function’ assuming all factors except price of the commodity
constant:
Qd = f( P ), f’< 0
 This demand function is graphically shown by a negatively sloped demand
curve. f’ stands for the first derivative of the demand function with respect to
price and it measures the slope of the demand function. Demand function
being negatively sloped f’ is negative.
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, Guest Faculty, Department of Commerce, University of Calcutta, subirmaitra.wixsite.com/moocs 10

11. Law of Demand
 The law of demand states the relationship between the quantity demanded
and price of a commodity.
 According to this law, other things remaining the same, the quantity
demanded of a commodity increases when its price decreases and decreases
when its price increases.
 Here other things include all other determinants of demand except the price
of the commodity such as individual’s income, prices of the related
commodities, individual’s taste and preferences, individual’s expectations etc.
 This law implies that other things remaining the same (ceteris
paribus),demand and price are inversely related. The law of demand is
depicted by the negatively sloped demand curve.
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, Guest Faculty, Department of Commerce, University of Calcutta, subirmaitra.wixsite.com/moocs
11

12. End of Lecture-1