EXCEPTIONS TO LAW OF DEMAND & DETERMINANT

“Other things being equal, the higher the price of the commodity, less is the quantity demanded and lower the price, more is the quantity demanded.”

When price rises, demand falls and when price falls, demand rises.

Demand varies inversely with price

Demand curve is a downward sloping demand curve to brings out the negative relationship

LAW OF DEMAND

EXCEPTIONS TO LAW OF DEMAND

1. Giffen Goods : rice & wheat from maize & jowar

2. Articles of Snob Appeal : Jewelry, Luxury.

3.Expectations regarding future prices : Shares

4. Emergencies : war, famines.

DETERMINANT OF DEMAND Price of the Product

 Income & Income distribution

Number & Price of related goods (substitutes & complements)

Consumer tastes, preferences, needs, etc.

Population-Structure & Distribution

Future price expectations of consumers

Price of a commodity Income of the consumer Price of related goods – Substitute goods (Tea

and Coffee) & Complementary goods (Car and Petrol)

Taste and preferences of the consumer – Black & White T.V. seta are replaced by color T.V. sets

Age structure and sex ratio of the population Advertisements and sales techniques Numbers of buyers in the market. Consumer expectations

FACTORS AFFECTING DEMAND IN COMPETITIVE MARKET

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