Demand Analysis

Introduction
Man wants to buy a car but he does not have sufficient money to pay for it A rich miserly person wants to buy a car but is not willing to pay for the car A person has sufficient money and is willing to pay the price of the car

Basics
The term Demand implies a desire for a commodity backed by the ability and willingness to pay for it A want with 3 attributes Desire to buy Willingness to pay Ability to pay

Why do we say this???

Basics
Demand for LED TV is 50,000 - What does this imply??? The Annual Demand for LED TVs in Delhi at an average price of Rs60,000 per piece is 10,000 - What does this imply???

Basics
The Quantity demanded of a commodity The price at which a commodity is demanded The time period over which a commodity is demanded The market area in which a commodity is demanded

Demand Function
Expresses the functional relationship between the demand for the product and its various determining variables

Dx= f( Px,Ps,Pc,Yd,T,A,N,u )

 Economics is a Behavioral science in that it describes the behavior of economic agents.

A demand function is a behavior function for consumers. A supply function is a behavior function for producers.

The Demand Curve

The demand curve for any good shows the quantity demanded at each price, holding constant all other determinants of demand. The Dependent variable is the quantity demanded. The Independent variable is the goods own price.

The Law of Demand

The Law of Demand says that a decrease in a goods own price will result in an increase in the amount demanded, holding constant all the other determinants of demand. The Law of Demand says that demand curves are negatively sloped.

Demand

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A DEMAND CURVE
A demand curve must look like this, i.e., be negatively sloped.
own price

demand quantity demanded

Assumptions
No change in C.Income, preferences,price of related goods, fashion, size, age composition and sex ratio of the population No change in the range of goods available to the consumers, distribution of income, government policy, weather conditions.

Demand Curve can never have an upward slope. Do you agree??

Giffen Goods Articles of snob appeal Speculation

Consumers bias

Factors Influencing Market Demand

Price Distribution of Income and wealth Scale of preference Spending habits No. of buyers and population growth Age structure and sex ratio Future Expectations Level of tax structure Inventions and Innovations Fashion, Climate , Customs, Advertisement and sales propoganda

Identify the major factors influencing demand for

Ice Cream Sugar Ball pen Designer Jeans

Demand Distinctions
Consumers goods and Producers goods Perishable and Durable goods Industry and Company Demand Short run and Long run Demand Joint and Composite Demand Price , Income and Cross Demand