Theory of demand, demand schedule and curve, market demand

Introductory Economics and marketing

( NRE - 221 )

Submitted to - Dr. Rajkumar

Submitted by - Lakshay (MHU2023H43B)
 Topic - Theory of demand, demand
schedule and curve, market demand
 What is demand ?

• Demand generally means "a want to acquire a good supported

by willingness for a good".
• In simple words, demand means the different quantities of a
commodity that will be bought at every possible cost during a
particular time in given market.
• If a person desire to purchase a tractor, but he didn't not have
the enough money to pay for the purchase of tractor, then it
will be treated simply a desire or a want and not a demand.
There are main attributes of demand in economies:

•a) The willingness and actual ability to pay.

•b) Demand is always at a particular price in particular
period.
•c) Demand is invariably per unit of time.

 Type of demand ?
• Individual’s Demand: It is the demand of any
commodity for whom the buyer wants to buy that
particular good at any rates at that particular point of
time. This demand of the goods is inversely proportion
to the price of that particular good.
• Market Demand: This demand is the total sum of the
demand of individuals for a particular commodity at
various possible prices at a particular point of time.
• Derived Demand: The demand for those goods which are
linked with other goods demand as raw materials for the
industries, tools and equipment etc.
• Autonomous Demand: The demand of goods which are
not linked with others good as food articles and clothes
etc.
 Kind of demand ?
• Price Demand : It is the demand of various quantities of
a good or commodity for which the consumer is
willingness to purchase that good or service at each
possible price at a given point of time .
• Income Demand : It is the demand of various quantities
of a good or commodity for which the consumer is
willingness to purchase that good or service at
different level of income at a given point of time .
• Cross Demand : It is the demand of various quantities
of a good or commodity for which the consumer is
willingness to purchase not due to changes in the
rates of the goods under consideration but due to
changes in the rates of related goods .
 Law of demand
• It describes the functional relationship between price
and quantity demanded of the goods. Demand varies
inversely related to price. An increase in price eads to
decrease in demand of commodity and vice-versa.
This shows a negative relation demand .
between quantity demanded and price of the commodity, hence the negative slope of
 Assumptions

• The income of the consumer is given and constant .

• No change in tastes, preference, habits, etc .
• Price of other goods is constant .
• No change in size and composition of population .
 Exception to Law of demand
• Griffen goods : It is also known as Giffen paradox. It
describes the experience in case of inferior goods. E.g.,
when the price of inferior goods decline, the consumer
buy less number of goods instead of purchasing more
and switch on to a superior goods .
• Prestigious goods : These are those goods which are very
high prices and usually are used for luxurious life and to
show the status and one's wealth. E.g. Jewellery, AC cars
etc .
• Ignorance effect : The consumer can purchase a large
quantity of the commodity, when the rates of that commodity
are very high, this may be due to the ignorance .
• Network eternality : In this case the utility of a person depends
upon the consumption of the goods by other people.
Generally, the network externalities are interdependence on
the demands of different individuals. It may be positive or
negative, i.e., Bandwagon and Snob effect .
 Demand curve
• Switch in demand of a commodity may be shown by
demand curve in two different ways :
• a.) Change along the demand curve (Extension and
contraction).
• b.) Motion of the demand curve (Increase and
decrease).
• Change along the demand curve or extension and constraction in demand
: It refers to change in the quantity of the goods due to change in rates of
the commodity. If income and other factors of demand such as changes in
prices of related goods, tastes and preference, income distribution, etc.
remains constant and there is a change only in rates of the goods, then the
demand curve remains stable. When the change in rates increase or
decrease the quantity demanded, it is known as extension and contraction
in demand. Extension means increase in quantity demanded due to
decrease in price of commodity, while contraction means decrease in
quantity demand due to increase in price of commodity .
• Motion in demand curve : It is Motion of the demand curve is
referred to as a change in demand not due to change in rates
of the goods but due to any other factors. A demand curve will
shift due :
• change in in the rates of other commodities leading to
increase or decrease of real income .
• change in the income level of the individuals .
• switch in consumer’s taste and preference .
 Factors a ecting demand
• Price of good : This factor is not so important which in luence
the demand for a commodity. Of course, the change in rates of a
commodity may in luence the consumption of other goods, as it
depends upon the relationship between the two commodities .
• Income : Demand of the goods is also in luenced by change in
income of the consumer. The more quantity of a commodity will
be demanded when the income of the consumer is high . The
only exception , demand of inferior goods will decrease with
increase in income level .
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• Individuals taste and priority : The taste and priorities of a consumer
for a speci ic good may affect the demand of commodity .
• Population : The size of population has directly effect on demand of
commodity. If the size of population is higher, higher is the demand
and vice-versa .
• Region and season : In winter season, the demand for eggs and meat
would be high as compared to summer season. In High altitude
areas, the demand for, woolen clothes, wine and meat, etc, would be
more as compared to low altitude areas .
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