B.Com Semester 1 Lecture-1 Demand and Consumer Behaviour
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This document is a lecture on microeconomics and the concept of demand. It begins by defining key terms like market, demand, demand function, and the law of demand. It explains that demand refers to a desire for a good backed by purchasing power. The demand function shows the relationship between quantity demanded and factors that influence demand like price, income, tastes. The law of demand states that, all else equal, quantity demanded increases when price decreases and decreases when price increases, as shown by the inverse relationship between demand and price on a demand curve. The lecture provides examples and explanations of these fundamental microeconomics concepts.
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