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Susmita Jha
m ÷he demand for anything, at a given price, is the amount of it,
which will be bought per unit of time, at that price.´
m By demand we mean the various quantities of a given
commodity or service which consumers would buy in one market
in a given period of time at various prices.´
m Requisites:
a. Desire for specific commodity.
b. Sufficient resources to purchase the desired commodity.
c. Willingness to spend the resources.
d. Availability of the commodity at
m (i) Certain price (ii) Certain place (iii) Certain time.
m ÷he law of demand states that ³higher the price,
lower the demand, and vice versa, other things
remaining the same´.
m Its an inverse relationship between price and
commodity.
Exceptions to the law of demand are
¦ ½iffen goods.
¦ Conspicuous consumption.
m An increase in
demand shifts
the demand
curve to the right.
m Equilibrium price
increases.
m Quantity
demanded
increases.
m A decrease in
demand shifts
the demand
curve to the
left.
m Equilibrium
price falls.
m Quantity
demanded falls.
. Individual demand
2. Market demand
3. Income demand
4. Cross demand
- Demand for substitutes or competitive goods (eg. tea & coffee, bread and rice)
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m Price of the commodity ± Normally there is an inverse relationship
between the price of the commodity and the quantity demanded. (Px)
m Income of the Consumer ± Determines the purchasing power of the
consumer. ½enerally, there is a direct relationship between the income
of the consumer and demand. (Y)
m Consumer¶s taste and preference (÷)
m Price of related commodities (Pr)
m Consumer Expectation (expected change in price)
m Distribution of income
m Size and composition of population
m Other Factors e.g., natural calamities
Qdx = f (Px, Pr ,Y , ÷, D)
m Demand Schedule: a tabular presentation
showing different quantities of a commodity
that would be demanded at different prices.
÷ypes of Demand Schedules
=
=
m Availability of substitutes
m Postponement of consumption
m Proportion of expenditure (needles: inelastic; ÷ : elastic)
m Nature of the commodity (necessity vs. luxury)
m Different uses of the commodity (paper vs. ink)
m ÷ime period (elastic in the long term)
m Change in income (necessaries: inelastic)
m Habits
m Joint demand
m Distribution of income
m Price level (very costly & very cheap goods: inelastic)
m Price elasticity of demand
m Income elasticity
m Cross price elasticity
m Advertising elasticity
D Elastic Demand or more than ± When quantity demanded
responds greatly to price changes
D Inelastic Demand or less than ± When quantity demanded
responds little to price changes.
D nitary Elastic ± When quantity demanded responds equally to
the price changes.
D Perfectly inelastic or elastic demand
D Perfectly elastic or infinite elastic demand
m Durables goods:
X Short-run elasticity is greater than long-run elasticity (e.g.
automobiles)
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O
6 O
6
O
m Where can we find data?