1. DEMAND ANALYSIS

2. WHAT IS DEMAND
• Every want supported by the willingness and ability to pay.
• To have a demand three conditions are to met
• - Desire on the part of the buyer to buy.
• - Willingness to pay for it.
• - Ability to pay the specified pay for it.

3. TYPES OF DEMAND
• Three types of demand;
• - price demand,
• - income demand,
• - cross demand.
• Price demand- quantity of a particular product demanded at a
given price.
• Income demand- quantity demanded at a given level of
income of a consumer.
• Cross demand- quantity demanded given the price of related
goods. The related goods may be complementary or a
substitute.

4. NATURE OF DEMAND
• Consumer goods Vs Producer goods.
• Autonomous demand Vs Derived demand.
• Durable Vs Perishable goods.
• Firm demand Vs industry demand.
• Short- run demand Vs Long-run demand.
• New demand Vs Replacement demand.
• Total market Vs Segment market demand.

5. FACTORS DETERMINING DEMAND
• Price of the product (P).
• Income level of the consumer (I).
• Tastes and preferences of the consumer (T).
• Prices of related goods which may be
substitutes/complementary(P^R).
• Expectations about the price in future (E^P).
• Expectations about the income in future(E^I).
• Size of population(S^P).
• Distribution of consumers over different regions(D^C).
• Advertising efforts (A).
• Any other factors capable of affecting the demand (D).

6. DEMAND FUNCTION
• Q^d= f(P,I,T,P^r,E^p,E^i,S^p,D^c,A,O)
• IMPACT OF DEMAND FACTORS:
• Price of the product.
• Income of the consumer.
• Price of substitutes or complementaries.
• Tastes and preferences.

7. LAW OF DEMAND
• Other things remaining the same, the amount of quantity
demanded rises with every fall in the price and vice versa.
• The Law of Demand states the relationship between price and
demand of a particular product or service.
•

8. ASSUMPTION OF LAW OF
DEMAND
• CAN U PLS TELL ME THE ASSUMPTION?
• ANSWER………………………….
• LIMITATION OF LAW OF DEMAND.

9. OPERATION OF THE LAW OF
DEMAND
• P
P1
Q Q1

10. LAW OF DEMAND AND INCOME
EFFECT
• When there is a fall in the price of a commodity- rise in real
income of the consumer.
• Real income- consumer will be able to buy more commodities
for a given amount of money.

11. LAW OF DEMAND AND
SUBSTITUTION EFFECT
• Price of a commodity falls, the price of its substitutes
remaining the same, the commodity will now be cheaper
compared to the substitutes.

12. IMPACT OF INCOME AND
SUBSTITUTION EFFECT
• The substitution effect is considered to be stronger than the
income effect because consumers generally buy inexpensive
commodities in place of expensive ones.
• There are certain exceptions:
• -When there is a shortage of necessaries feared.
• - When the product is such that it confers distinction- Veblen
goods.
• - Giffen’s Paradox.
• - In case of ignorance of price change.
• - Speculative commodities.

13. CHANGE IN DEMAND
• The increase or decrease in demand due to change in the
factors other than price is called change in demand.
• Increase in demand- if the consumer are willing and able to
buy more of a particular product which will increase the
demand. The demand curve will shift to the right.
• Decrease in demand- if the consumer buys less of a product, a
decrease in demand occurs.

14. EXTENSION AND
CONCENTRATION IN DEMAND
• Extension- downward movement along the demand curve-
indicating that a higher quantity is demanded for a given fall in
price.
• Contraction- upward movement along the demand curve-
indicating a lower quantity is demanded for a given increase in
the price.

15. LAW OF SUPPLY
• Supply depends upon the prices of factor inputs, infrastructure facilities,
technological advances, and several other factors.
• Supply means the quantity of goods or service offered for sale at various prices
at any moment of time or during a specific time period.
• LAW OF SUPPLY: more quantities of commodity will be offered for sale at higher
prices and less quantities will be offered for sale at lower prices.
• There is a direct or positive relationship between market price and supply.
• Producers or firms supply goods for profit.
• A producer supply more quantity of good at a higher price because of its
profitability.
• When price falls- profit comes down.
• Less amount of supply.
• If price falls below cost of production- change to other product or out of
business.
• The supply curve slopes upward from left to right.