1. THEORY OF “DEMAND”

2. How much to produce and what price to charge?
INTRODUCTION
How much to produce and what price to charge?
Factors determining demand for a product.
Explores the relationship between price and demand for a product.
Examines likely impact of the potential factors that influence its demand.
Rishabh

3. WHAT IS DEMAND? Types of Demand
The quantity of a product consumers are willing and able to buy at different prices in a specified time period.
Types of Demand
-Direct and derived demands
-Individual and market demand
-Recurring and replacement
-Complementary and competing
-New and replacement demands
Shabaz

4. DETERMINANTS OF DEMAND
Price of Product
Income of Consumer
Price of Related Good
Tastes and Preferences
Advertising
Consumer’s expectation of future Income and Price
Growth of Economy
Seasonal conditions
Population
anupam

5. DEMAND SCHEDULE It shows the price and output relationship.
Tabular representation of price and demand.
mintu

6. DEMAND CURVE
The geometrical representation of demand schedule is called the demand curve.
mintu

7. LAW OF DEMAND
As the price of a good rises, quantity demanded of that good falls.
As the price of a good falls, quantity demanded of that good rises.
Ceteris paribus.
Mintu

8. DEMAND FUNCTION
When we express the relationship between demand and its determinant mathematically, the relationship is known as demand function.
The demand for product X can be written in functional form as-
Dx= f (Px, Y, Po, T, A, Ef, N )
Mintu

9. EXCEPTIONS TO THE LAW OF DEMAND
Inferior Goods
Snob Appeal
Demonstration Effect
Future Expectation of Prices
Insignificant proportion of income spent
Goods with no Substitutes
BABA

10. CHANGE IN DEMAND VS. CHANGE IN QUANTITY DEMANDED
A shift of the entire demand curve to a new position is called change in demand.
Changes in non-price determinants of demand.
Rishabh

11. QUANTITY DEMANDED
Fluctuations in price, another determinant of demand, cause movement along the demand curve.
Rishabh

12. Why the demand curve slope downwards?
Law of diminishing marginal utility.
Income effect.
Substitution effect.
New consumers.
Multiple use of commodity.
rishabh

13. ELASTICITY OF DEMAND
Elasticity of demand is defined as the responsiveness of the quantity of a good to changes in one of the variables on which demand depends-
Price of the commodity
Income of the Consumer
Various other factor
DEFINATION-’’The elasticity of demand measures the response of the demand for the commodity to change in price”.
shahbaz

14. PRICE ELASTICITY OF DEMAND
The price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price.
baba

15. PRICE ELASTICITY OF DEMAND
Point Definition
Arc Definition
baba

16. Perfectly Inelastic Demand: Elasticity Equals 0 city of Demand
Price
Demand
100 $5
1. An
increase
in price . . . 4
Quantity
leaves the quantity demanded unchanged.
Copyright©2003 Southwestern/Thomson Learning

17. Inelastic Demand: Elasticity Is Less Than 1
Price
Demand $5 90
1. A 22%
increase
in price . . . 4
100
Quantity
leads to an 11% decrease in quantity demanded.

18. Unit Elastic Demand: Elasticity Equals 1
Price
Demand $5 80
1. A 22%
increase
in price . . . 4
100
Quantity
leads to a 22% decrease in quantity demanded.
Copyright©2003 Southwestern/Thomson Learning

19. Elastic Demand: Elasticity Is Greater Than 1
Price
Demand $5 50
1. A 22%
increase
in price . . . 4
100
Quantity
leads to a 67% decrease in quantity demanded.

20. Perfectly Elastic Demand: Elasticity Equals Infinity
Price
1. At any price
above $4, quantity
demanded is zero. $4
Demand
2. At exactly $4,
consumers will
buy any quantity.
3. At a price below $4,
quantity demanded is infinite.
Quantity