DEMAND ANALYSIS

AND LAW OF
DEMAND
Nikhil 97
Jun-98
Vaidehi-99
Nikita- 100
Vishakha-101
Pooja-102

Meaning And Definition Of

Demand .
In common usage, demand means
a desire or a want, but, in
economics desire, want and
demand are three different
concepts. In economics, every
desire is not a want and every want
is not a demand.

In economics the term desire has been

has been use as three forms :
1) Prof. Pension : Demand is an effective
desire.
a)Desire for a commodity
and availability of
the desired
commodity,
b)Ability to pay for the
desired commodity
c)Willingness to spend for it.
2) Prof. Mill : Demand is the quantity
demanded at a particular price.
3) Prof. Bentham : Demand is the
quantity demanded at a particular

Types Of Demand .
Price Demand
Income Demand
Cross Demand :
i) Complementary
Goods.
ii) Substitute Goods.
Joint Demand
Derived Demand
Collective Demand

Essential elements of
demand
There must be a desire for a particular
commodity.
Desired commodity must be available in the
market.
Consumer must have sufficient amount of
money and he is ready to spend to purchase the
commodity.
The demand must be expressed at a particular
price.
The demand must be expressed at a particular
time.

Explanation of law of
demand
EXPLAINS RELATIONSHIP BETWEEN
PRICE AND DEMAND OF A
COMMODITY.
DEMAND DECREASES PRICE
INCREASES AND DEMAND
INCREASES PRICE INCREASES.
INVERSE RELATION BETWEEN PRICE
AND QUANTITY DEMANDED.

Individual Demand Schedule :

Price of
commodity

Quantity
Demanded

10

10

12

Market Demand Schedule :

Price of
Commo
dity

Mr. X Mr. Y

Mr. Z

Total Market
Demand

10

40

20

12

26

10

14

32

10

12

16

38

12

14

18

44

Individual & Market Demand Curve

Assumptions of law of
demand
Income of the consumer remains constant

There should be no change in tastes and

preferences
Population should remain constant
There should be no hope of change in prices
Government policy should remain constant
Weather conditions should be same
No new advertisements should be introduced

Reasons of law of demand sloping downwards

Law of diminishing marginal utility.

Substitution effect
Income effect
Number of consumers

Shift in Demand
Changes in
quantity
demanded.

Expansion of
demand Increase
in demand (due to
fall in prices).
Contraction in
demand
Decrease in
demand (due to
rise in prices).

 Changes in
demand

Increase in demand
Shift in demand
curve towards right.

Decrease in
demand- Shift in
demand curve
towards left.

Exceptions to law of
Demand

Giffins Paradox
Conspicuous necessities
Commodities of prestige
Expectations of future changes in
price
Emergencies

Determinants of Demand

Prices of commodity
Income of consumers
Price of related goods
Habits and tastes
Size of population
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