-
8/14/2019 Economic Principle That Describes a Consumers Desire
and Willingness To
1/18
DEMAND
An economic principle that describes a
consumers 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.
-
8/14/2019 Economic Principle That Describes a Consumers Desire
and Willingness To
2/18
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 arewilling to buy at a
given price per time unit.
-
8/14/2019 Economic Principle That Describes a Consumers Desire
and Willingness To
3/18
KINDS OF DEMAND
DEMAND FOR FIRMS 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 .
-
8/14/2019 Economic Principle That Describes a Consumers Desire
and Willingness To
4/18
KINDS OF DEMAND
AUTONOMOUS DEMAND :-
It arises on its own out of natural desireto consume or
possesses a commodity. (e.g.,demand for food, clothes shelter).
DERIVED DEMAND :-
The demand for commodity thatarises because of the demand for
some other
commodity called parent product, is calledderived demand.
-
8/14/2019 Economic Principle That Describes a Consumers Desire
and Willingness To
5/18
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.
-
8/14/2019 Economic Principle That Describes a Consumers Desire
and Willingness To
6/18
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.
-
8/14/2019 Economic Principle That Describes a Consumers Desire
and Willingness To
7/18
DETERMINENTS OF MARKET
DEMAND
Price of product.
Price of substitute.
Level of income.
Taste and preferences. Advertisement.
Consumers expectation about price and supplyposition.
Population of country. Distribution pattern of national
income.
-
8/14/2019 Economic Principle That Describes a Consumers Desire
and Willingness To
8/18
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, ceterisparibus("all other things
being equal").
-
8/14/2019 Economic Principle That Describes a Consumers Desire
and Willingness To
9/18
-
8/14/2019 Economic Principle That Describes a Consumers Desire
and Willingness To
10/18
Shifts in Demand curve
A shift in a demand curve occurs when a
good's quantity demanded changes even
though price remains the same.
-
8/14/2019 Economic Principle That Describes a Consumers Desire
and Willingness To
11/18
-
8/14/2019 Economic Principle That Describes a Consumers Desire
and Willingness To
12/18
ELASTICITY OF DEMAND
price elasticity of demand
income elasticity of demand
cross elasticity of demand
http://en.wikipedia.org/wiki/Price_elasticity_of_demandhttp://en.wikipedia.org/wiki/Income_elasticity_of_demandhttp://en.wikipedia.org/wiki/Cross_elasticity_of_demandhttp://en.wikipedia.org/wiki/Cross_elasticity_of_demandhttp://en.wikipedia.org/wiki/Income_elasticity_of_demandhttp://en.wikipedia.org/wiki/Price_elasticity_of_demand
-
8/14/2019 Economic Principle That Describes a Consumers Desire
and Willingness To
13/18
PRICE ELASTICITY OF
DEMAND
-
8/14/2019 Economic Principle That Describes a Consumers Desire
and Willingness To
14/18
PRICE ELASTICITY OF
DEMAND
1.When the price elasticity of demand for a
good iselastic(|Ed| > 1), the percentage
change in quantity demanded is greater thanthat in price.
-
8/14/2019 Economic Principle That Describes a Consumers Desire
and Willingness To
15/18
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.
-
8/14/2019 Economic Principle That Describes a Consumers Desire
and Willingness To
16/18
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.
-
8/14/2019 Economic Principle That Describes a Consumers Desire
and Willingness To
17/18
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 tozero
q1 q2
p
price
quantity
-
8/14/2019 Economic Principle That Describes a Consumers Desire
and Willingness To
18/18
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 isa vertical straight
line; this violates the law of
demand
p1
p2
q
price
quantity
