Faculty – CA Rachna Parakh Dubey

1. Meaning: Demand means quantity (vi) Fashion on Good

of goods & service that a person is Demand (vii) Habit forming Good
willing to buy/ able to purchase at (iii) Price is independent variable. (viii) Demonstration effect / band wagon
given price during given period of (iv) One sided law. effect.
time. (v) Qualitative statement. 11. Change in Demand:
2. Types of Demand: (vi) 1st law of purchase → Alfred A. Change in Quantity Demand:
Marshal. → Rise in Quantity demand, due to fall
Individual Demand Market Demand 6. Assumption of Law of demand: in price, keeping other factor
(i) Ceteris Peribus constant.
 Demand of single  Total demand of (ii) Man is Rational → Fall in quantity demand, due to rise
consumer. all consumer (iii) Normal goods. in price keeping other factor
 Household residing in area. 7. Demand schedule: constant.
demand.  Industry demand. P Q P A B C C P Q P Q
1 100 1 100 50 40 190 2 10 1 20
3. Factor Affecting Individual 2 80 2 80 40 30 150
Demand 1 20 2 10
3 60 3 60 30 20 110
(i) Price of a commodity: Price of a 4 40 4 40 20 10 70 y - axis
commodity is inversely related. 5 20 5 20 10 0 30 Contraction
When P↑ demand ↓, when P↓ d↑. Individual Market C

Price
(ii) Income of consumer: Income Demand demand A
Expansion
affect demand in following way: schedule schedule B
A. Normal Goods: In case of normal Tabular Horizontal
Goods, when demand↑, Income↑. representation summation of O Quantity x - axis
B. Inferior Goods: In case of Inferior showing individual B. Change in Demand:
good, when demand↓, Income↑. different demand → Increase in demand due to
(iii) Taste of Preference: If taste has quantity, which schedule. favourable changes in other factor
orange, the demand ↑. Eg. consume can keeping price constant.
Typewriter vs keyboard. buy at various → Decrease in demand, due to
(iv) Related Commodity: price. unfavourable changes in other
A. Complementary Goods: Those 8. Demand Curve: factor keeping price constant.
goods which are used together to P↑ D↓ * Downward P I Q P I Q
satisfy given demand. Eg. Car, slope 10 1000 10 10 2000 20
P↓ D↑
Petrol. * Negative slope 10 2000 20 10 1000 10
y - axis D2
 Inverse Relation: Price of Petrol ↑,
9. Demand function: Demand D1
demand of car ↓.
function shows the functional
B. Substitute Goods: Those goods D3
Price
relationship b/w demand & factor
which are used in place of each
affecting.
other to satisfy given demand.
 Direct Relation: Tea of price ↑, 𝐷𝑥 = 𝑓(𝑃𝑥 , 𝑃𝑦 , 𝐼, 𝑇, … … … . . )
10. Exceptions of Law of Demand: O Quantity x - axis
Demand of coffee ↓
(i) Emergencies like war &
(v) Future price Expectation 12. Reason for Law of Demand:
curfew: (P↑D↑) • Income effect.
4. Factor affecting Market Demand:
(ii) Giffen goods: Sir Robert Giffen, • Substitution effect.
(i) Size & types of population:
London school of economics, 19th
(Direct relation) Pop. ↑, Demand↑ • New customer creating more
century.
(ii) Season & Weather: eg. Rainy demand.
→ Giffen goods are special variety
season – Raincoat ↑, summer • Many uses of a commodity.
of inferior goods on which
season – Raincoat ↓.
consumer spend large amount of • Law of diminishing marginal utility.
(iii) Credit Policy: If credit policy 13. Types of Demand:
his income. This goods purchase
liberal, demand ↑, if credit policy is • Joint demand.
strict demand↓. even their price↑ (P↑ D↑). eg.,
Bread, meat. • Composite demand.
(iv) Taxation Policy: If people have to • Derived demand.
pay high tax, demand ↑, If credit
• Autonomous demand.
policy is strict demand ↓.
• Firm v/s industry demand.
(v) Income Distribution: If income
evenly distributed b/w to people, (iii) Veblon Goods: Sir TB Veblon,
• Cross demand.
demand ↑, if income is unevenly Doctrine of conspicous 14. Demand Forecasting:
distributed b/w people, demand ↓. Consumption. The art of predicting probable demand
(iv) Speculative Goods: Share for product/service at some future date
5. Law of Demand: Law of demand market goods. P↑D↑ eg. Share, based on past behaviour pattern of
variables.
states that inverse relation b/w Debentures .
price & demand. Eg. P↑ D↓ ; P↓ D↑ (v) Ignorance of consumer: If
consumer don’t know about the
 Features of law of demand: price, he is ready to purchase
(i) Inverse relation b/w price, even at high price.
demand. Eg. Onion (Reliance fresh Rs
(ii) Not proportionate change. 70kg) & (Street vendor Rs 10kg).

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