Академический Документы
Профессиональный Документы
Культура Документы
If you cant pay for a thing, dont buy it. If you cant get paid for it, dont sell it.
MEANING OF DEMAND
Demand signifies the ability or the willingness to buy a particular commodity at a given point of time or at a specified price. Demand for commodity implies on three things:
Demand is the desire or want backed up by money. Demand is always related to price & time. Demand may be viewed ex-ante or ex-post.
CLASSIFICATION OF DEMAND
Demand
Consumers & Durable & Non-Durable Goods Demand Derived Company or Firm Short -Run & Long-Run Demand
&
Industry Demand
Individual Demand
ID....refers to the demand for a product from the individual persons point of view. It is single consuming entitys demand.
Market Demand
MD.refers to the total demand of all the buyers, taken together. It is aggregating all individual buyers demand function in the market.
Consumers Expectations.
Advertisement Effect.
Future Expectations.
Inventions & Innovations. Fashions. Climate or Weather Conditions. Customs. Advertisement & Sales Propaganda.
LAW OF DEMAND
It is the functional relationship between the quantity demanded of a particular product and its price in the market. The equation can be written as:
Qdx = f (Px)
Statement of the Law: According to Alfred Marshall The law of demand states that, .. The amount demanded increases with a fall in prices & diminishes with a rise in prices.
No change in Consumers Income. No change in Consumers Tastes & Preferences. No change in the Prices of related Goods. No change in Fashions. No change in Government Policy. No change in the Distribution of Income & Wealth. No change in Weather Conditions.
Cont.
DEMAND SCHEDULE :: A Tabular Statement of price or quantity relationship is called the demand schedule. It shows the quantity of goods that a consumer would be willing and able to buy at specific prices under the existing circumstances. DEMAND CURVE :: A Graphical presentation of a demand schedule is known as demand curve. It expresses the relation between the price charged for a product & the quantity demanded , holding constant the effects of all other variables.
Individual Demand Schedule and Curve. Market Demand Schedule and Curve.
Price of Oranges
Quantity Demanded
D P r i c e
(Qty. in kg.)
2 4
20
15 10
6
10 16
Quantity Demanded D
Price (Rs.) 4 3 2 1
DD is the Market Demand Curve , which is the summation of all individual demand curves.
Why does the Demand Curve Slope Downwards from Left to Right ??
2. Income Effect
3. Substitution Effect
Giffen Goods. Speculation. Articles of snob appeal (Expensive Commodities). Consumers psychological bias or illusion. Demonstration Effect. Goods with no substitutes.
D P r i c e
Demand
ELASTICITY OF DEMAND
Alfred Marshall defines:: The Elasticity of Demand in a market is . Great or small according to the amount demanded... Increases much or little for a given fall in price, and diminishes much or little for a given rise in price.
Elasticity of Demand = % age Change in Quantity Demanded % age Change in Determinant of Demand
ELASTICITY OF DEMAND
Income Elasticity of Demand Cross Elasticity of Demand
Price elasticity of demand is a measure used in economics to show the responsiveness of the quantity demanded of a good or service to a change in its price. Price Elasticity of Demand = Proportionate Change in Quantity Demanded Proportionate Change in Price
Perfectly Elastic Demand. Perfectly Inelastic Demand. Unitary Elastic Demand. Relatively Elastic Demand.
When the demand for a product changes increases or decreases even when there is no change in price, it is known as perfect elastic demand.
P r i D c e
e =
D
Quantity Demanded
D Quantity Demanded
When the proportionate change in demand is equal to proportionate changes in price, it is known as unitary elastic demand.
D P r P i c e P
e = 1
Quantity Demanded
When the proportionate change in demand is more than the proportionate changes in price, it is known as relatively elastic demand.
D P r P i c P e
e > 1
Quantity Demanded
When the proportionate change in demand is less than the proportionate changes in price, it is known as relatively inelastic demand.
D P r P i c e P
e < 1
D
Q Q
Quantity Demanded
Income elasticity of demand measures how much the quantity demanded of a good responds to a change in consumers income.
Income Elasticity of Demand = Percentage Change in Quantity Demanded Percentage Change in Income
Unitary Income Elasticity. Income Elas. Greater than Unity. Income Elas. Less than Unity. Zero Income Elasticity.
D Q Q
Quantity Demanded
Quantity Demanded
When income increases .. quantity demanded also increases but less than proportionately, it is known as income elasticity less than unity.
D Q Q Quantity Demanded
When quantity demanded remains the sameeven though income increases, it is known as zero income elasticity.
D Quantity Demanded
When there is increase in incomethen quantity demanded falls, it is known as negative elastic demand.
D I n Y c o m Y e
e < 0
D Q Q
Quantity Demanded
The cross elasticity of demand or cross-price elasticity of demand measures the responsiveness of the demand for a commodity to a given change in the price of some another commodity.
1. Substitute Goods
A substitute good is a good with a positive cross elasticity of demand. This means a good's demand is increased when the price of another good is increased. For example: Tea and Coffee
e > 0
D P r P i c P e D Q Q
Quantity Demanded
2. Complementary Goods
A complementary good is a good with a negative cross elasticity of demand. This means a good's demand is increased when the price of another good is decreased.
For example: Bread and Butter.
e < 0
P P r i c P e D Q Q
Quantity Demanded
3. Unrelated Goods
e = 0
D P r P i c P e
The unrelated goods have zero cross elasticity of demand. This means a change in the price of one good has no effect on the demand of another good. For example: Razor Blade & Petrol
D Quantity Demanded
SUPPLY ANALYSIS
MEANING OF SUPPLY
The supply of a commodity means the amount of that commodity which producers are able and willingness to offer for sale at a given prices in specific period of time. The supply of a product mathematically expressed as: Sx = f (Px,Py,Pi,T,Mi,G,N etc.) can be
which includes Total supply of product x, Price of product x, Price of related products, Prices of inputs, Change in technology, Time periods etc.
DETERMINANTS OF SUPPLY
Time Periods.
Government Policy. The Natural Factors. Self Consumption. Sellers Expectations. Motives of Producer.
LAW OF SUPPLY
The Law of Supply simply expresses the relation between the quantity of product supplied & its price and other things remaining constant.
Sx = f (Px)
According to S.E.Thomas,
a rise in price tends to increase supply and a fall in price tends to reduce it.
Cost of production is unchanged. Fixed scale of production. Government policies are unchanged. No change in the technique of production. No speculation. No change in transportation cost. The prices of all other goods remains constant.
S
P R I C E
10 15 20 25 30 40
S
QTY. SUPPLIED
Price (Rs.) 5 15 25 35
Quantity Supplied A B C
Market Supply
P R I C E
10 20 30 20 40 50 30 50 80 50 90 100
S QTY. SUPPLIED
Labor Supply
Rare Goods
Self Consumption
Future Expectation
Hoardings
ELASTICITY OF SUPPLY
Elasticity of supply is the responsiveness of producers to changes in the price of their goods or services .
Elasticity is measured as the percent change in quantity divided by the percent change in price.
When the supply for a product changes increases or decreases even when there is no change in price, it is known as perfectly elastic supply.
P r i S c e
Quantity Supplied
When there is a heavy change in price level, but there is no change in quantity supplied, it is known as perfectly inelastic supply.
S P r P i c P e
S Quantity Supplied
When the proportionate change in supply is exactly equal to proportionate changes in price, it is known as unitary elastic supply.
P r P i c e P S Q Q
Quantity Supplied
When the proportionate change in supply is greater than the proportionate changes in price, it is known as relatively elastic supply.
S P r P i P c e
Quantity Supplied
When the proportionate change in supply is less than the proportionate changes in price, it is known as relatively inelastic supply.
S P r P i c e P
S
Q Q
Quantity Supplied
MARKET EQUILIBRIUM
Market equilibrium is that state in which the quantity that firms want to supply equals the quantity that consumers want to buy.
According to Marshall,
Just As the two blades of a pair of scissors are required t cut the cloth, so also the two blades of demand & supply are required to determined the price in the market.
150
200
250 300 350 400
4
3 2 1 0
4
5 6 7 8
Market Disequilibrium
At prices above the equilibrium price, quantity supplied is greater than quantity demanded, resulting in a temporary surplus.
At prices below the equilibrium price, consumers desire to buy more products than are available, creating a temporary shortage.
P
400
Price
Quantity
Recent News..Gold
Why gold had been going through a phenomenal bull run for the past 11 years. Gold went up when the market went up. It went further up when the market went down - and it's still moving closer to the top. What are the logical reasons behind this increasing valuation? Gold demand is rising faster than its supply. Central banks around the world are hoarding gold and are buying more. Inflationary Pressures and Fear
In the commodities market, traders buy and sell commodities based on their expectation about future supply and demand equations, thus pushing the price higher or lower. There are two primary ways in which Gold is supplied : Mines and Recycled Gold. Recycled gold supply will depend on gold price expectation, cost and availability. The three primary drivers of gold demand are Jewellery, manufacturing technology products such as semiconductors, and Investments.
All Central banks need some reserve assets that are readily available to them and are buying more gold in order to reduce their dependency on the dollar or euro. Gold is liquid and not correlated closely to any other asset class, not even to its own supply demand equation. In India, The gold holding is 557.5 tonnes which is least among the major economies. RBI is known to buy International Monetary Fund gold and considers investment in gold as a safe investment. But India is the largest country with a gold demand of 933.4 tonnes, which is a quite significant figure considering fact that fluctuating and increasing gold prices and rupee weakening against U.S. dollar.
Though no one says gold prices are going up only because of inflation, it does play an indirect role in the price rise.
With most central banks around the world engaged in monetary easing, inflationary fears and the expectation of weakening local currency pushes investors and banks to hedge their position using gold. Inflation or deflation, as long as economic concerns and fear remain, investment demand for gold will remain steady.
In 2011, India and China accounted for 61% of total demand of gold. When a country's economy grows..the more the growth, the more the demand for gold will be. If these economies slow down, then the demand for gold will automatically dive. But there is one more problem, the price rise.people are not able to afford that much money. The strength of local currency can also pay a major role here. For example, the Indian currency weakened steadily against the dollar this year. While the price of gold dropped around 10% in the global market this year, the price of gold kept moving higher in India due to the country's weak local currency.
Cont..
Todays Gold Rate in India:
10 gram gold Rate in India = Rs.32320.00 24 carat gold per gram Rate in India = Rs.3232.00 22 carat gold per gram Rate in India = Rs.3022.00
(Updated On 10-09-2012)