Date : 26.5.2020
A very good morning boys
Today we will start with the 3rd chapter Demand
Let us understand the 3 different terms:
2. Demand is always with respect to a period of time
To sum up we can say Demand is the quantity of a commodity that a consumer is willing and able to buy,at each possible price during a given period of time.
Demand for a commodity may be either with respect to an individual or to the entire market.
1. Individual Demand :
2. Market Demand:
Determinants of Demand ( Individual Demand)
1. Price of the given commodity : There exists an inverse relation between Prive and quantity demanded.
2.Price of Related Goods : When we talk about related goods ,we talk in terms of 2 goods .
(i) Substitute goods : They have a direct relationship
(ii) Complementary goods : They have an inverse relation
3. Income of the Consumer : Again for income of the consumer we consider 2 goods.
(i) Normal goods : They have a direct relation with income of the consumer
(ii) Inferior goods : They have an inverse relation with income of the consumer. As income of consumer increases the demand for inferior good decreases.
4. Taste and Preference : A favourable taste for a good increases demand for the good while an unfavourable taste decreases the demand for the good.
5. Expectation of change in the Price in Future: There exists a direct relationship between expectation of change in the price in future and change in demand in the current period.
Determinants of Market Demand
1.Size and composition of Population : Increase in population increases the market demand and vice -versa.
When talking about composition if there are more babies in the population then demand for baby products will be more
2. Seasons and weather : During the monsoon season the demand for umbrellas increases in the market irrespective of increase or decrease in price of the umbrella.
3. Distribution of Income : If there is equal distribution of income in the economy there will be increase in market demand in the economy and vice- versa.
NOTE: All the above factors will be taken into consideration only by keeping all other factors constant.
Demand Function: It shows the relationship between quantity demanded for a particular commodity and the factors influencing it.
It means a relationship of quantity demanded for a particular commodity with any of the above factors mentioned
Demand Schedule : Is a tabular representation of various quantities of a commodity being demanded at various levels of price, during a given period of time.
Individual Demand Schedule
Market Demand Schedule
Demand Curve : It is a graphical representation of demand schedule.
Individual Demand Curve : It refers to a graphical representation of individual demand schedule.
Market Demand Curve : refers to a graphical representation of market demand schedule.
Market demand curve is obtained by horizontal summation of the individual demand cruves {DA + DB }
Market Demand Curve is Flatter : because as price changes, proportionate change in Market demand is more than proportionate change in individual demand.
Movement along the Demand Curve VS Shift in Demand Curve
A very good morning boys
Today we will start with the 3rd chapter Demand
Let us understand the 3 different terms:
- Desire means a mere wish to have a commodity
- Want is that desire which is backed by the ability and willingness to satisfy it
- Demand is an extension to want as it has teo more characteristics
2. Demand is always with respect to a period of time
To sum up we can say Demand is the quantity of a commodity that a consumer is willing and able to buy,at each possible price during a given period of time.
Demand for a commodity may be either with respect to an individual or to the entire market.
1. Individual Demand :
2. Market Demand:
Determinants of Demand ( Individual Demand)
1. Price of the given commodity : There exists an inverse relation between Prive and quantity demanded.
2.Price of Related Goods : When we talk about related goods ,we talk in terms of 2 goods .
(i) Substitute goods : They have a direct relationship
(ii) Complementary goods : They have an inverse relation
3. Income of the Consumer : Again for income of the consumer we consider 2 goods.
(i) Normal goods : They have a direct relation with income of the consumer
(ii) Inferior goods : They have an inverse relation with income of the consumer. As income of consumer increases the demand for inferior good decreases.
4. Taste and Preference : A favourable taste for a good increases demand for the good while an unfavourable taste decreases the demand for the good.
5. Expectation of change in the Price in Future: There exists a direct relationship between expectation of change in the price in future and change in demand in the current period.
Determinants of Market Demand
1.Size and composition of Population : Increase in population increases the market demand and vice -versa.
When talking about composition if there are more babies in the population then demand for baby products will be more
2. Seasons and weather : During the monsoon season the demand for umbrellas increases in the market irrespective of increase or decrease in price of the umbrella.
3. Distribution of Income : If there is equal distribution of income in the economy there will be increase in market demand in the economy and vice- versa.
NOTE: All the above factors will be taken into consideration only by keeping all other factors constant.
Demand Function: It shows the relationship between quantity demanded for a particular commodity and the factors influencing it.
It means a relationship of quantity demanded for a particular commodity with any of the above factors mentioned
Demand Schedule : Is a tabular representation of various quantities of a commodity being demanded at various levels of price, during a given period of time.
Individual Demand Schedule
Price
|
Quantity demanded of a commodity X(in
units
|
5
|
1
|
4
|
2
|
3
|
3
|
2
|
4
|
1
|
5
|
Market Demand Schedule
Price
|
Individual Demand
|
Market Demand (in units ){DA +
DB }
|
|
Household A (DA)
|
Household B (DB)
|
||
5
|
1
|
2
|
1+2 = 3
|
4
|
2
|
3
|
2+3 = 5
|
3
|
3
|
4
|
3+4 = 7
|
2
|
4
|
5
|
4+5 =9
|
1
|
5
|
6
|
5+6 =11
|
Demand Curve : It is a graphical representation of demand schedule.
Individual Demand Curve : It refers to a graphical representation of individual demand schedule.
Market Demand Curve : refers to a graphical representation of market demand schedule.
Market demand curve is obtained by horizontal summation of the individual demand cruves {DA + DB }
Market Demand Curve is Flatter : because as price changes, proportionate change in Market demand is more than proportionate change in individual demand.
Law of Demand : states the inverse relationship between price and quantity demanded, keeping other factors constant ( ceteris paribus).
Assumptions of Law of demand
1. Price of substitute goods do not change.
2. Price of complementary goods remain constant.
3. Income of the consumer remains the same.
4. There is no expectation of change in price in the future.
5. Taste and preferences of the consumer remain the same.
Price
|
Quantity demanded of a commodity X(in units
|
5
|
1
|
4
|
2
|
3
|
3
|
2
|
4
|
1
|
5
|
Movement along the Demand Curve VS Shift in Demand Curve
For Elasticity of Demand please refer to the text books
good morning sir kevin sunil pappan 11B
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