2. DEMAND Desire backed by willingness and ability to payfor a
commodity. It implies: Desire to acquire it Willingness to pay for
it Ability to pay for it. Managerial Economics Unit-I CONCEPT
OF2DEMAND (Batch 2012-14)10/25/2012
4. TYPES OF DEMAND1.Consumer goods and Producer goods Consumer
goods- Goods & services used for finalconsumption. Producer
goods- Goods used for production of othergoods.2. Perishable and
Durable goods.3. Autonomous and Derived demand Autonomous- Goods
whose demand is not tied up withthe demand for some other
goods.4.Individuals demand & Market demand Mkt dd is the
summation of dd for a good by all individual. Price of X and dd by
buyer1,2,3 and all buyers market dd. Managerial Economics Unit-I
CONCEPT OF4DEMAND (Batch 2012-14) 10/25/2012
5. 5. Firm & Industry demand All firms producing a
particular good. Eg.- DD for Hyundai car and all types of car.6.
Demand by market segment and total market. Geographical spread
Product uses Distribution channel Customer size Product
varietyManagerial Economics Unit-I CONCEPT OF5 DEMAND (Batch
2012-14) 10/25/2012
6. DEMAND FUNCTION The DD function is an algebraic expression
of the relationbetween the demand for a commodity and its
variousdeterminants. Dx = f(PX , PS, PC, Y, T,E,U )Dx = Demand for
X itemPX = Price of X itemPS = Price of substitute goodsPC = Price
of complimentary goodsY= Income of consumerT= Taste or preference
of consumerE= Price expectation of the userU= All other
factorsManagerial Economics Unit-I CONCEPT OF6 DEMAND (Batch
2012-14)10/25/2012
7. DETERMINANTS OF DEMAND Price of the commodity Price of the
related commodities Substitute goods. Complimentary goods. Income
of the consumer d y Normal goods. Necessites. Inferior goods.
Tastes & preferences of consumer. Expectations about future
price. Managerial Economics Unit-I CONCEPT OF7DEMAND (Batch
2012-14) 10/25/2012
8. DETERMINANTS OF DEMANDSize and regional distribution of
population.Composition of population.Distribution of
income.Managerial Economics Unit-I CONCEPT OF8 DEMAND (Batch
2012-14) 10/25/2012
9. CAUSES OF CHANGE IN DEMAND INCREASE IN DEMAND: In income
& wealth of the people. In the population. In the prices of
substitute goods. In the prices of complementary goods.
Expectations of rise in prices in future. Changes in tastes,
preferences, habit,customs in favor of a commodity.Managerial
Economics Unit-I CONCEPT OF9 DEMAND (Batch 2012-14)10/25/2012
10. CAUSES OF CHANGE IN DEMAND DECREASE IN DEMAND: In income
& wealth of the people. In the population. In the prices of
substitute goods. In the prices of complimentary goods.
Expectations of fall in prices in future. Changes in tastes,
preferences, habit, customs, against a commodity Managerial
Economics Unit-I CONCEPT OF10 DEMAND (Batch 2012-14)10/25/2012
11. CHARACTERISTICS CONCEPT OF DD DEMONSTRATES THEFOLLOWING:
Demand is always with reference to aprice. Demand is referred to in
a given periodof time. Consumer must have the necessarypurchasing
power to back his desire forthe commodity. Consumer must also be
ready toexchange his money for the commodity Managerial Economics
Unit-I CONCEPT OF11 DEMAND (Batch 2012-14)10/25/2012in
question.
12. LAW OF DEMAND The inverse relationship between the price
andquantity demanded of a commodity, other thingsremaining the same
(ceteris paribus). In other words, when the (price of goods) s, dds
and when p , dd , provided factors other thanthe price do not
changed. Managerial Economics Unit-I CONCEPT OF12 DEMAND (Batch
2012-14) 10/25/2012
14. Reason for downward sloping Curve 1.Law of diminishing
marginal utility.As a consumer keeps on consuming successive units
of the same commodity, consumption of other commodities remaining
constant, MU diminishes. 2.Income effect. 3.Substitution effect.
4.Changes in the number of consumers. 5.Diverse uses of
commodity.Managerial Economics Unit-I CONCEPT OF14DEMAND (Batch
2012-14)10/25/2012
15. EXCEPTIONS TO LAW OF DEMAND 1. Prestige is directly
associated with price ofgoods. 2. Giffen paradox 3. Emergency 4.
Expectations about future priceManagerial Economics Unit-I CONCEPT
OF15DEMAND (Batch 2012-14)10/25/2012
16. CHANGE IN DEMAND & CHANGE INQUANTITY DEMANDED CHANGE IN
DEMANDCHANGE IN QUANTITY DEMANDED Change in demand essentially
happens due to Change in quantity a change in the factors demanded
happens affecting demand. essentially due to a change in the price
of that commodity. Change in demand causes Change in quantity a
shift in the Demand demanded causes a Curve ,i.e., an increase in
movement along the demand causes the demand curve. demand curve to
shift outwardswhereas a16 decrease causes anManagerial Economics
Unit-I CONCEPT OFDEMAND (Batch 2012-14) 10/25/2012 inward
shift.
17. MOVEMENT ALONG DD CURVE A movement along a demand curve
occurs when the ONLY factor that changes . Managerial Economics
Unit-I CONCEPT OF17 DEMAND (Batch 2012-14) 10/25/2012
18. It is just an arrow along the demand curve in the correct
direction. As price increases the movement would be to the left, as
price decreases the movement would be to the right. If the quantity
decreases it is known as contraction. If the quantity increases it
is known as expansion Managerial Economics Unit-I CONCEPT OF18
DEMAND (Batch 2012-14)10/25/2012
20. In this diagram the shift from demand curve D1 to demand
curve D2 is represented by an actual translation across the plane.
This particular diagram features an inward shift to the left, or a
shrink in demand. An outward shift would be an increase in demand.
This shift is caused by any actual changes in the determinants of
demand. Managerial Economics Unit-I CONCEPT OF20 DEMAND (Batch
2012-14)10/25/2012
22. SUPPLY It is the willingness and ability of producers to
make a specific quantity of output available to consumers at a
particular price over a given period of time. Supply is the mirror
image of demand.Managerial Economics Unit-I CONCEPT OF22DEMAND
(Batch 2012-14) 10/25/2012
23. LAW OF SUPPLY There is positive relation between price and
quantity supplied other things remaining constant. Variables other
than price: Money cost of production Inter-related supply
Managerial Economics Unit-I CONCEPT OF23 DEMAND (Batch 2012-14)
10/25/2012
24. TYPES OF SUPPLY CURVE The supply curve is upward sloping.
There are TWO types of change in supply; 1. Movement ALONG the
supply curve 2. SHIFTS in the supply curve Managerial Economics
Unit-I CONCEPT OF24 DEMAND (Batch 2012-14) 10/25/2012
25. A movement ALONG the supplycurve A movement along the
supply curve is caused by a change in PRICE of the good or service.
For instance, an increase in the price of the good results in an
EXTENSION of supply (quantity supplied will increase), whilst a
decrease in price causes a CONTRACTION of supply (quantity supplied
will decrease).Managerial Economics Unit-I CONCEPT OF25DEMAND
(Batch 2012-14)10/25/2012
26. A SHIFT in the supply curve A shift in the supply curve is
caused by a change in any non- price determinant of supply. The
curve can shift to the right or left. A rightward shift represents
an increase in the quantity supplied (at all prices) S1 to S2,
whilst a leftward shift represents a decrease in the quantity
suppliedManagerial Economics Unit-I CONCEPT OF26DEMAND (Batch
2012-14) (at all prices). S1 to S3. 10/25/2012
27. THINGS TO REMEMBER The supply curve follows the law f
supply when price and quantity supplied increases and vice versa.
The horizontal axis-quantity-has time dimension. The quantities are
of the same quality. The vertical axis-price-is a relative price.
The curve assumes everything else is constant. Effects of price is
shown by movement and shift in supply curve.Managerial Economics
Unit-I CONCEPT OF27DEMAND (Batch 2012-14) 10/25/2012
28. MARKET EQUILIBRIUM PRICEA price that can be maintainedPrice
SURPLU SupplyE is the state of balance, from which there is no
tendency toS change. E P SHORTAGDemand E Quantity Q
