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Diti Demand

The document discusses the concept of demand in economics, highlighting its definition as an effective desire to purchase a commodity at a specific price and time. It outlines the determinants of demand, including consumer income, tastes, and prices of related goods, and explains the law of demand, which describes the inverse relationship between price and quantity demanded. Additionally, it addresses exceptions to the law of demand and factors that can lead to changes in demand.

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Abhijit Ghosh
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26 views15 pages

Diti Demand

The document discusses the concept of demand in economics, highlighting its definition as an effective desire to purchase a commodity at a specific price and time. It outlines the determinants of demand, including consumer income, tastes, and prices of related goods, and explains the law of demand, which describes the inverse relationship between price and quantity demanded. Additionally, it addresses exceptions to the law of demand and factors that can lead to changes in demand.

Uploaded by

Abhijit Ghosh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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SOUTH CALCUTTA GIRLS’ COLLEGE

NAME : DITI SAHU


COLLEGE ROLL NO : 23AH335
CU ROLL NO : 232035-11-0048
CU REGISTRATION NO : 035-1214-0059-23
SUBJECT : ECONOMICS MINOR
PAPER NAME : MECON
DEPARTMENT : BA GEOGRAPHY (MAJOR)
SEMESTER : 3
YEAR : 2025
TOPIC : DEMAND AND LAW OF DEMAND
MEANING OF DEMAND

always expressed
demand is an always expressed
with reference to
effective desire, in relation to a
a particular time
i.e. particular price.
period.

a desire + the will


to purchase +
power to
purchase.
Determinants of demand
Price of the commodity

Income of the
consumer (i)
normal goods,
(ii) inferior
goods, (iii)
inexpensive
necessities of
life.)

Consumers' tastes and preferences

Prices of related goods ((i) substitute or competitive


goods and (ii)
complementary goods.)

C
onsumers'
expectations

C
onsumer-credit
Income of the consumer

(i)Normal goods- Normal goods are those goods the


demand for which increases with increase in income of the
consumers and decreases with fall in income.

(ii)Inferior goods- Inferior goods are those goods the


demand for which falls with increase in income of the
consumer.

(iii)Inexpensive goods of necessities- In case of


inexpensive necessities of life such as salt and match-box,
quantity purchased increases with increase in income up to a
certain level and remains constant irrespective of the level of
income.
Y

I
N
Y
2
INCOM

I
G
E

Y
1

X
O Q1 Q
QUANTIT 2
Y
Demand function
It states the relationship between the demand for a product and its determinants.

Dx = f(Px…P , Y, X-1

T,E,H,y,G…)
⚫ Dx Demand for commodity x
⚫ F shows functional relation
between?
⚫ Px Price of commodity x
⚫P X-1 Price of all other
commodities
⚫ Y Income of the consumer
⚫ T Tastes and preferences of
consumer
⚫ E Expectations of future prices
⚫ H Size of population
⚫ y Distribution of income
Law of demand

The law of demand


shows a functional
relationship between
price and quantity
demanded of a
commodity.
Why Does the Demand Curve Slope Downwards to the Right?

• Marginal utility • A change in • The effect that a


of the demand on change in
commodity falls account of relative prices of
with an change in real substitute
increase income resulting goods has on
in its from change in the quantity
consumption. A the price of a demanded.
consumer will commodity is
maximise his known as income
satisfaction effect
when Marginal
utility of a
commodity =
Price of the
commodity.
Law of Substitution
diminishing 1 Income Effect 2 Effect
3
marginal utility
Why Does the Demand Curve Slope Downwards to the Right?

• A fall in the • When the prices of


price of a such commodities
commodity are very high, they
leads to an can be used for
increase in more important
quantity purposes only a
demanded by small quantity will
the existing be in demand.
consumers due • But when the price
to income and falls, the commodity
substitution will be put to less
effects. important uses also,
leading to an
increase in demand.
Increase
Several 5
in 4 uses of
number
a
of
Exceptions to the Law of Demand

We may observe that more


quantity of a commodity is
demanded at a higher
price, and less of it is
demanded a lower price. In
these situations, ,the
inverse relationship
between price and the
amount purchased does
not hold good.
These are known as
exceptions to the law of
demand in such situations,
demand curve may not
have a negative slope; it
may slope upward showing
positive relation.
Exceptions to the Law of Demand
• They are those inferior • Commodities which serve • When the consumers
goods on which the as 'status symbol', anticipate a large fall in
consumer spends a large increase social prestige or the price of a commodity
part of his income and are a source of display of in future, they will
the demand for it falls wealth and richness. postpone their purchase
with a fall in their price. Veblen has termed these even if price falls today so
goods as 'conspicuous as to purchase this
consumption'. commodity at a still lower
price in future.

Expectatio
Articles n
Giffen
of snob regarding
goods appeal future
prices:
• During emergencies like • Consumers take price
war, famines, etc. as an index of quality.
consumer behave in an
abnormal way. If they
expect shortage of goods,
they would buy and hoard
goods even at high prices.
During depression they
will buy less even at low
prices
Quality-
Emergenci
price
es relationshi
Movement along the demand curve
When the amount demanded changes (rises- or
falls) as a result of change in its own price,
while other determinants of demand (like
income, tastes and prices of related goods)
remain constant, it is known as
⚫ Change in Quantity Demanded
Movement
⚫ It may be ofalong
two the Demand
Y Curve
D

types: P
A
3
⚫ Extension of 3 A
P 1
demand
PRIC

1 A
P 2
⚫ Contraction of
E

2
D
demand.

O Q Q Q X
QUANTIT 3 1 2
Y
Factors which causes change in demand
Increase in demand Decrease in
demand
Increase in income Decrease in income

Rise in the price of substitute


goods Fall in the price of substitute goods

Fall in the price of Rise in the price of complementary


complementary goods goods

Favourable change in tastes and Unavourable change in tastes and


preferences preferences

Expectation of rise in price Expectation of fall in price

Increase in population Decrease in papulation


THANK
YOU

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