Demand final
- 2. Demand vs. Quantity Demanded Demand is the amount of a product that people are willing and able to purchase at each possible price during a given period of time, everything else (but price) held constant. – It is a relationship between prices and quantities. The quantity demand is the amount of a product that people are willing and able to purchase at one, specific price. – It is a quantity.
- 3. Types of Demand Direct and Indirect Recurring and Replacement Complementary and Competing Individual and Market Demand
- 4. Determinants of Demand Price of the product Income of the consumer Price of related goods Tastes and preferences Advertising Consumer expectations Population Growth of economy etc.
- 5. Law of Demand Law of Demand: There is an inverse relationship between the price of a good and the quantity consumers are willing and able to purchase during a particular period of time. – As price of a good rises, consumers buy less. – Depicts the quantity-price relationship with all else assumed to be constant. The determinants of demand are factors other than price that influence demand: income, tastes, prices of related goods, expectations, and numbers of buyers.
- 6. Representations of Demand Demand Schedule: A table or list of the prices and corresponding quantities demanded of a particular good or service. It is the price-quantity relationship presented in tabular form. Demand Curve: A graph of the demand schedule with price on the vertical axis and quantity demanded on the horizontal axis.
- 7. Demand Schedule and Demand Curve for Videos Price Quantity $5 10 $4 20 $3 30 $2 40 $1 50
- 8. Change in Demand vs. Change in the Quantity Demanded
- 9. Aggregation of Demand (I)
- 10. Aggregation of Demand (II)
- 11. Why demand curve is negatively sloped Law of diminishing marginal utility. Fall in price leads to more purchase and more buyers. Substitution effect. Income effect.
- 12. Price and quantity are negatively related Some reasons include: income effect--as the price of a good declines, the consumer can purchase more of all goods since his or her real income increased. substitution effect--as the price declines, the good becomes relatively cheaper. A rational consumer maximizes satisfaction by reorganizing consumption until the marginal utility in each good per dollar is equal: Optimality Condition is MUA/PA = MUB/PB = MUC/PC = ... If MU per dollar in A and B differ, the consumer can improve utility by purchasing more of the one with higher MU per dollar.
- 13. Exception to Law of Demand Giffen goods : Giffen goods are special type of inferior goods. Eg : Coarse grain, salt etc. Conspicuous Necessities : Commodities like TV, fridge as through their constant use they have become necessities of life. Conspicuous consumption : Goods like diamond etc. where with an increase in price of the good, Quantity demanded increases. Future changes in price : Households act as speculators. Emergencies : Like war, flood negate the operation of law of demand. Change in fashion Ignorance
- 14. Activity A : Which of the following statements depicting demand are correct: A toy shop selling different types of tous, each priced at Rs. 20 at a hill station makes a business of Rs. 3500 each day. In CP, the total population is one lakh. A fruit vender sells 50 fruits (of different varieties) in a day. Activity B: Following are some instances. In each, write how the demand will be affected: Prices of washing machines go down drastically. Right next to a busy snack centre, a new one comes up. VAT(value-added tax) is announced on all saleable commodities(goods & services). Activity C: Some people only buy ‘Branded Products’. Comment.
- 15. CASE STUDY : The Demand for Big Macs