MEANING

When a consumer is willing and able to purchase a fixed quantity of a

commodity at various prices in market during a given period of time.
e.g. A consumer demands 2 kg of wheat in a month ₹20 per kg.
Note:
→ Demand is a flow concept.
→ Demand always means effective Demand
Individual Demand
When a Single individual is willing to purchase a fixed quantity of a commodity
at Various prices called individual Demand.

Market Demand
Sum of all individuals demand
in the market is called Market
Demand
Schedule
Price A’s Demand B’s demand C’s Demand Market
Demand
(A+B+C)
2 4 5 6 15 = (4+5+6)
4 3 4 5 12 =(3+4+5)
6 2 3 4 9 = (2+3+4)
8 1 2 3 6 = (1+2+3)
Demand function
Demand function shows the Relationship between the Demand for a
commodity and Various factor Affecting it.
Dx = f (Px, Po , Y, T, D, E)
DIAGRAMS
SLOPE OF DEMAND CURVE
Demand function
 DETERMINANTS OF DEMAND

DETERMINANTS OF DETERMINANTS OF
INDIVIDUAL DEMAND MARKET DEMAND
Price of given commodity Size & composition of
Price of related goods population
Income of consumer Season & weather
Taste & preference Distribution of income
Expectation
Factors Affecting Demand / Determinants of Demand.

1. Px = Own price of the

commodity.
Law of Demand: It states that
“Other things remaining Constant”
when price of the Commodity
increases, then the quantity
demanded of that Commodity
decreases and Vice, Versa.
→ Law of Demand is a Qualitative
Statement
 Schedule SCHEDULE & DIAGRAM

Price X Demand X

2 20

3 18

4 16

5 14
2. Po = Price of Other Related Goods.
Po = Price of Other Related Goods
Other Related goods are of Two Types.
(i) Substitute/Competitive goods: Substitute
goods are those goods which can be used in
place of other.
e.g. Tea, Coffee, Pepsi, Coke. Etc.
Price Tea ↑ Demand coffee ↑ (Direct
Price Tea ↓ Demand coffee ↓ Relationship)
Substitution effect is Positive
These goods are highly competitive good
DIAGRAMS
ii) Complementary goods:
Complementary goods are those
goods
which have jointly Demand eg. Pen,
ink,
Petrol, Car. Explanation: If the of one
commodity increases then demand for
other commodity decreases and
Vice-Versa.
Price petrol ↑ Demand cars ↓

price petrol ↓ Demand cars ↑

Inverse relationship (Negative)
DIAGRAMS
3. Y - Income of Consumers
Necessary goods
When the income of a consumer
increases or decreases then the
Demand for Necessary goods do not
change.
e.g. Medicines, Textbooks,
Matchbox, Salts etc.
Normal goods
When the income of consumer
increases the Demand for Normal
goods also increases and if the income
of consumer decreases then the
Demand for Normal goods also
Decreases.
Inferior goods
When the income of a consumer
increases the demand for inferior
goods decreases and if the income
of consumer decreases then
demand for inferior goods increases
Diagrams
4. T - Taste or preference of consumer.
It means likings or Disliking of Consumer. It is the Subjective Approach of
consumer.
→ if Taste of consumer is favorable for any commodity then Demand for that
commodity increases
It causes Rightward shift in Demand curve.
→ If Taste of consumer is unfavorable for any commodity then Demand for
that commodity decreases.
It causes leftward shift in Demand curve.
5. Distribution of income 6. Expectation of consumer
REASONS FOR LAW OF DEMAND
Why demand curve is downwardly sloping to right ?
(i) Law of Diminishing Marginal Utility
(ii) Substitution Effect
(iii) Income effect
(iv) Additional consumers
Difference Between change in Quantity demand & change in demand
EXCEPTIONS TO LAW OF DEMAND
(i) Giffen goods: These are special kind of inferior goods on which the
consumer spends a large. Part of his income and their demand rises with
an increase in price and demand falls with decrease in price. e.g. Course
cereals like jawar, bajra etc. This also called "Giffen Paradox".
(ii) Ignorance: It consumer is not aware about the prevailing prices then he
may buy more of a commodity at a
higher price.
(i) Status symbol (Prestigious goods): For status
symbol goods consumer can ready to pay more.
i.e. Demand for prestigious goods rises
even its price rises.
iv) Fashion related goods: Goods related to fashion do not follow the law of
demand and their demand rises even price rises. e.g. designer dresses.
(v) Necessities of life: Goods which are become necessities of life due to their
constant use. e.g. rise, wheat, salt, medicine etc.
(vi) Urgent demand: In case of urgent demand consumer can pay high price for
the same quantity of goods
e.g. Demand for vegetables in a Marriage function
Thank you
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