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    Demand

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    Rohit Kumar

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    © All Rights Reserved
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    Demand

    Uploaded by

    Rohit Kumar
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    ( Demand)

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    Demand

    Uploaded by

    Rohit Kumar

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    ( Demand)

    - Definition
    Demand refers to the quantity of a good or service that consumers are willing and able to
    purchase at various prices during a given period of time.

    - Law of Demand
    - Statement: Other things being equal, there is an inverse relationship between the price of a
    good and the quantity demanded.

    - Explanation: As the price of a good rises, the quantity demanded falls, and as the price falls,
    the quantity demanded rises.

    - (Demand Schedule)

    - Individual Demand Schedule: A table showing the quantities of a good that an individual
    consumer is willing to buy at different prices.

    - Market Demand Schedule: A table showing the total quantities of a good that all consumers in
    a market are willing to buy at different prices.

    - (Demand Curve)

    - Definition: A graphical representation of the demand schedule, showing the relationship


    between the price of a good and the quantity demanded.

    - Characteristics:
    - Downward sloping from left to right.
    - Reflects the law of demand.

    -(Determinants of Demand)

    1. Price of the Good: The primary factor affecting demand.

    2. Income of Consumers:
    - Normal Goods: Demand increases with an increase in income.
    - Inferior Goods: Demand decreases with an increase in income.

    3. Prices of Related Goods:


    - Substitutes: An increase in the price of one leads to an increase in the demand for the other.

    - Complements: An increase in the price of one leads to a decrease in the demand for the
    other.
    4. Tastes and Preferences: Favorable changes increase demand, and unfavorable changes
    decrease demand.

    5. Expectations: Expectations of future price changes can affect current demand.

    6. Number of Buyers: More buyers lead to higher demand.

    - (Types of Demand)
    1. Individual Demand: Demand by an individual consumer.
    2. Market Demand: Total demand by all consumers in the market.
    3. Joint Demand: Demand for goods that are used together (complements).
    4. Derived Demand: Demand for a good that results from the demand for another good (e.g.,
    demand for labor due to demand for goods produced).
    5. Composite Demand: Demand for a good that has multiple uses.

    - (Movement vs. Shift in Demand Curve)

    - Movement along the Demand Curve: Caused by a change in the price of the good.
    - Extension (Increase) in Demand: Movement down the curve (due to a price decrease).
    - Contraction (Decrease) in Demand: Movement up the curve (due to a price increase).
    - Shift in the Demand Curve: Caused by changes in other determinants of demand (income,
    tastes, prices of related goods, etc.).
    - Increase in Demand: Rightward shift of the demand curve.
    - Decrease in Demand: Leftward shift of the demand curve.

    - Elasticity of Demand
    - Price Elasticity of Demand (PED): Measures the responsiveness of quantity demanded to a
    change in price.
    - Formula: PED = (% Change in Quantity Demanded) / (% Change in Price)

    - Types:

    - Elastic Demand (PED > 1): High responsiveness to price changes.

    - Inelastic Demand (PED < 1): Low responsiveness to price changes.

    - Unitary Elastic Demand (PED = 1): Proportional responsiveness to price changes.

    - Income Elasticity of Demand: Measures the responsiveness of demand to a change in income.

    - Cross Elasticity of Demand: Measures the responsiveness of demand for one good to a
    change in the price of another good.

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