MANAGERIAL ECONOMICS

TOPIC- THEORY OF DEMAND

CLASS-PGDM 1ST YEAR(X1) GROUP-1ST

1. AMAN SHARMA (GROUP LEADER) 2. A.MANOJVARMA 3. AAKASH BHARDWAJ 4. ANIL SAHU 5. ALOK PRAKASH 6. ANAS

ABSTRACT
WHAT IS DEMAND? DEMAND FUNCTION LAW OF DEMAND WHY DEMAND CURVE SLOPE DOWNWARDS? EXCEPTIONS TO THE LAW OF DEMAND

MEANING OF DEMAND

DEMAND FOR A COMMODITY REFERS TO THE QUANTITY OF THE COMMODITY WHICH AN INDIVIDUAL CONSUMER OR A HOUSEHOLD IS WILLING TO PURCHASE PER UNIT OF TIME AT A PARTICULAR PRICE. DEMAND FOR A COMMODITY IMPLIES (A) DESIRE OF THE CONSUMER TO BUY THE PRODUCT. (B) SUFFICIENT PURCHASING POWER TO BUY THE PRODUCT.

DEMAND FUNCTION

A MATHEMATICAL EXPRESSIONS OF THE RELATIONSHIP BETWEEN QUANTITY DEMANDED OF THE COMMODITY AND ITS DETERMINANTS IS KNOWN AS DEMAND FUNCTION. Qdx = f ( Px ,Y, P1,,Pn-1 , T, A,Ey,Ep,u) Px-PRICE OF COMMODITY Y-INCOME OF THE CUSTOMER P1-PRICES OF RELATED GOODS T-TASTES AND PREFERENCES A-ADVERTISEMENT Ey-EXPECTATIONS OF INCOME IN FUTURE Ep-EXPECTATIONS OF PRICE IN FUTURE

LAW OF DEMAND

LAW OF DEMAND STATES THAT HIGHER THE PRICE LOWER THE QUANTITY DEMANDED,AND LOWER THE PRICE HIGHER THE QUANTITY DEMANDED,WHEN OTHER THINGS REMAIN CONSTANT,i.e

Qdx = f(P).

INDIVIDUAL AND MARKET DEMAND SCHEDULES

DEMAND FOR APPLE BY INDIVIDUAL A
PRICE OF APPLE(RS.) QUANTITY DEMANDED OF APPLE(DOZEN) 10 1 9 3 8 7 7 11 6 13

MARKET DEMAND SCHEDULE FOR APPLE

PRICE OF APPLE (RS.PER DOZEN) QUANTITY DEMANDED OF APPLE (DOZEN) A 1 3 7 11 13 B 0 1 2 4 6 C 3 6 9 12 14 D 0 4 7 10 12 MARKET DEMAND OF APPLE (DOZEN)

10 9 8 7 6

4 14 25 37 45

WHY DO DEMAND CURVES SLOPE DOWNWARDS ?

THE LAW OF DEMAND STATES THAT, OTHER THINGS REMAINING THE SAME,AN INDIVIDUAL CONSUMER WILL BUY MORE OF A COMMODITY AT A LOWER PRICE AND LESS OF THAT COMMODITY AT A HIGHER PRICE. GENERALLY THE DEMAND CURVE SLOPE DOWNWARDS FROM LEFT TO RIGHT. THERE ARE SEVERAL REASONS FOR THIS. 1.The law of diminishing utility states that as one goes on consuming more and more units of a commodity its utility to him goes on diminishing. In order to get maximum satisfaction, a consumer buys a commodity in such a way that marginal utility of the commodity is equal to its price. 2.change in the number of consumers. A fall in the price of a commodity increases the number of households who demand it in the market, and a rise in the price of commodity reduces this number

EXCEPTIONS TO THE LAW OF DEMAND

GENERALLY THE AMOUNT DEMANDED OF A GOOD INCREASES WITH A DECREASE IN PRICE OF THE GOOD AND VICE VERSA. IN SOME CASES,HOWEVER,THIS MAY NOT BE TRUE. THESE EXCEPTIONS ARE THE FOLLOWING: A. GIFFEN GOODS. B. COMMODITIES WHICH ARE USED AS STATUS SYMBOLS. C. EXPECTATIONS OF CHANGE IN THE PRICE OF THE COMMODITY.

SUMMARY
WHAT IS DEMAND? DEMAND FUNCTION LAW OF DEMAND WHY DEMAND CURVE SLOPE DOWNWARDS? EXCEPTIONS TO THE LAW OF DEMAND

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