DEMAND

 An economic principle that describes a

consumer’s desire and willingness to pay a
price for a specific good or service .

 The relationship between price and quantity

demanded is known as the demand
relationship.
KINDS OF DEMAND
 INDIVIDUAL DEMAND :-
Quantity of the product demanded
by an individual at a point in time or over a
period of time.
 MARKET DEMAND :-
The total quantity of the product
which all the consumers of a commodity are
willing to buy at a given price per time unit.
KINDS OF DEMAND
 DEMAND FOR FIRM’S PRODUCTS :-
The quantity that a firm can dispose
of at a given price over a time period.

 DEMAND FOR INDUSTRY PRODUCTS :-

The aggregate of demand for the
product of all the firms of an industry .
KINDS OF DEMAND
 AUTONOMOUS DEMAND :-
It arises on its own out of natural desire
to consume or possesses a commodity. (e.g.,
demand for food, clothes shelter).
 DERIVED DEMAND :-
 The demand for commodity that
arises because of the demand for some other
commodity called ‘parent product’, is called
derived demand.
KINDS OF DEMAND
 DEMAND FOR DURABLE AND NON
DURABLE GOODS :-

 DURABLE GOODS – e.g., clothes ,shoes,

houses, furniture, utensils etc.

 NON DURABLE GOODS - e.g., food items,

soap, cooking fuel etc.
KINDS OF DEMAND
 SHORT TERM DEMAND :- demand for a
product that are required over a short period.
(fashion consumer goods, goods of seasonal
use etc.)
 LONG TERM DEMAND :- The demand that
exist over a long period. change in it is
perceptibly after a long time.
DETERMINENTS OF MARKET
DEMAND
 Price of product.
 Price of substitute.
 Level of income.
 Taste and preferences.
 Advertisement.
 Consumers expectation about price and supply
position.
 Population of country.
 Distribution pattern of national income.
LAW OF DEMAND
 The law of demand is normally depicted as
an inverse relation of quantity demanded and
price: the higher the price of the product, the
less the consumer will demand, ceteris
paribus ("all other things being equal").
Shifts in Demand curve
 A shift in a demand curve occurs when a
good's quantity demanded changes even
though price remains the same.
ELASTICITY OF DEMAND
 price elasticity of demand

 income elasticity of demand

 cross elasticity of demand

PRICE ELASTICITY OF
DEMAND
 PRICE ELASTICITY OF
DEMAND

1.When the price elasticity of demand for a

good is elastic (|Ed| > 1), the percentage
change in quantity demanded is greater than
that in price.
PRICE ELASTICITY OF
DEMAND
2.When the price elasticity of demand for a
good is inelastic (|Ed| < 1), the percentage
change in quantity demanded is smaller than
that in price.
PRICE ELASTICITY OF
DEMAND
3.When the price elasticity of demand for a
good is unit elastic (or unitary elastic) (|Ed| =
1), the percentage change in quantity is equal
to that in price.
PRICE ELASTICITY OF
DEMAND
4.When the price elasticity of demand for a
good is perfectly elastic (Ed =infinity), any
increase in the price, no matter how small,
will cause demand for the good to drop to
zero

price

q1 q2
quantity
PRICE ELASTICITY OF
DEMAND
5.When the price elasticity of demand for a
good is perfectly inelastic (Ed = 0), changes
in the price do not affect the quantity
demanded for the good. The demand curve is
a vertical straight line; this violates the law of
demand

p2
price
p1

quantity q