VOnhan Pamt

23218MOlol4o
MANAGERIAL EcONo MIcs ASslGNMENT-2.
. Define Decmand and Law of dem and witb example.
Lrh suttable diagan.
Adestne wkch is backad by i) abiity to buy
Ohd i) Jr linghess to Pay he Poice is caled
demand unless dhe destono is accom po hild by
ablity to buy and silthghess to Pay it cahnot
be calle d demand in Ecohohi cs .
to sloien and Haque "Demond in
Aecondng
Ccononics nodns. derdhd backed p by enough
money to
Pay los Hhe goods demanded.
Law of Denand
Nfesed Monshall-A aise in bhe aice of a
Comimo dity is follo boed by a fall in demahd and
a fal in Poice is folowod by o 9fse in dena
0 stse
if a Condifon of damand enains
cohstaht
hd
be explaihed sidh
The law of Oen arnd may
he demand schedue
Pice of mangoes in) Quatty benanded
25
2 20

5 5
Fso n the above damahd schedule above tabe
loas bat as poice of mong o0s
 RS.1 do Rs.2 damand falls onm 25 to 20.
Luhen Behe Psice of Mongo&s si ses to Rs.s
Tuanlity denah d falls to 's harngota
pico fall quantity
Same as

den and aises he basis of damand scha dule.

We can demand cunve f90m -e
aboveaico demand schodule
ofMongoces
Scale
oh x axis |cm= s units
On Y ais lcm= Iunit
3

20
Denand n unids)
In he above diag9am . demand is shown on
X- axis and paico is shooh Oh y - axis
-DD is dmand cUVa
- The demand cUve 0D shows he invesse selaion
beloeen Poice and quantty demdnd mangos.
- When Poice aises ton demand falls and Vice
Ve91 Sa.
-The damand cUIUe slope dobnwhd
downwond fnom left
2. Explatn he dssump lions of Law of Denand.
Law of Demand is based on he
0sumplons The lao sil hold gods only
folsing
if Le
lolozing assump Bons de
090 fulfled
Tho! he tastes and fasliones of he People
lnains un changed o) constant
’ Tha! the Peoplas în coms 2nains Coh slant
STha! o Patce of salaled goods cmain s same
’ That bene ame no substlutes fon be commo dity
in the maa kot
thet Bhe cohinodity is not hot one ohich
has nesie value sucdh as dimohd cte.
’ That be donand k be comnodtty should be
Coninous.
thed he Peole shou l! hot er pecl any change
in he toice of commodib
S Thal he Popullatan of be People Cmins conslanl

ndmains conslant
3. 0iscot be he erRec ons of Lao of Dcmand.
Some limes in case of Sohmo comino dites
denand cowe slofes upoasds from lefl b stght
’4! shoDS bat wen Paice aises demand also
9is0s and uhen Patce falls dmdhd also falls.
 case ho demand cuavo has a
fostlive. slope
ue can dao he ox pec i oha Demand Cusve
as follows

Psice (R9)

Q
02mand n ay)
5 n bhe above diagan demand is showh on
0X - axis and paico is shown ohoy- akis
’D0 is he dom ah d CUSIVO

WhenPofce încncass fmom c to oP1

9uanGty
damand also ncocases fnom 0Q to oQ1 ahd
bhe Poitice fals doon faohm of to op quantty
demand also falls down faom 0Q, to o4,
’Hence Bhe expional demandcve slopes
PDods fscm loflo sight in bis diagdm.
ceP
ExRckons to bhe Low of denahd
1. Giffonfao dok 6. LJhen Bene is shonkage
2. Pstsliage goods of hecossiies fecsed
3. sPocula fion 1. 9gno1ance of consumeNs
4. Tiode cyde 8. oul of foshton
s. Sghomance of pice changes
1. Gifen Paadox :
the the 1gb canley sn.
Robbent Giffen , a Bsiish Ecohomist obseavad hat
be Iow Patd. 8silsh woikons puchasing
broad , when s Posiod incheased.
’ This is sone
S
ing contoay to dhe lao of dera
2- Bheskige goods:
- This oxcepton is exlatned by ve
Itke diamonds , cae ete ose caled blen coly zods
0s veblen goods. Porsige gocds
Ganeally aich People pu chase ho Se goods fo
ne sake
3. Speculaons:
’ When he Psice of o commodity sises an d
People oxpect dhat il sill bise slil fuhe
Hence he hone. of at commodiy
4. Tmade cyde:
5 Dusing the Peatods of economics Pros fonity
Pootle buy moe won when the Paice 9ftses.
S This ha fens becase he inCohmgs
încom of he people
have gone uP.
have
5. Jghonahce of Psice changes
At limes ,he cu stom(7 moy hot kp nack
of changes in ice.n such a case he tond
lo bay ah in coe ase
in Poice.
When People cxect a fubhe ise in Poices,
Peofle buy mo When Picos si se.
6. Jheae hene is a shoztage of hecessites
feoned:
’1f the cusome9s foa that theoe could be
hen
hecessities , then is low
shotage of
does hot bold g00d.
an bhat hey
They nay tend to buy mose Psict
9qutae imnedialely ,evan the of he
Paoduct incnea ses.
7. Ypnomance of ConsumeNS

judge the quanttyof

’ The coh sum01 usually judye a
its Psice.
d loo Peniod comimodity is const dedd as
inteonicn and less quanlity is Puochased.
8. out of foshion :
’ The law of dem ahd is bot apptcable in case
of goods out of faskion.
’ The decnease in Poice canhot ai se he domand
of such gods.
|4. Defino Patce alastaty of D0mand . Enum eyote
ffencnt tyes of Psice closkcity of Deimard.
triee elaskay of Demand
’ Maash all 0s -Hhe f1st ccononist to define
Psice
dlaskciy of denond. nasu es changes
Pice clastctty of demand
in uantity de and to o chorge in Psice.
’ 4! is Hhe alio of tescendoe of change
in demand lo Roncendage f change in fsia.
>the ndlton shap bedueeh he Pon certage in
Change and de tescentage in domand is
khouh as elashcty of demand.
Paice elactcty
’ ! oxelaines be ale of change in deinahd
foa giveh chang in Bhe Psitce of e
t0 a
comodiby fercendage change in danand
Psice dlaskeity of demande.
Rercendage of dange în bsic
kinds of Poice dloss éiy of Dehnand
’Theae ame fve types ot Psitce dlaskciky of denand
they
I. Peafecy claske demand
2. fesdodly inelaske deand
3. Relatuly elaske denand
4. Relakvely inelaske demand
5. Ro Unit elasscily of dinond
1.
Peale cly Elaslic damand cusve
Y Ed
DD

Parice

Q
Demand
n bis diagam domand tsis showh on X- avis
and Pice on y- avfs.
D0 is hoizontal slsiaght Iine fonallel to x
as .Ths is shobh in is diagah.
! shows at oP Pice ans amouht is dem
an d 1f Psice inccases,the Coh sun03 ai |
not Puonchase be contmo dity.
’ Hone, be demahd has ihcaeased oom 0a
to oQ, veh is ho
dange
2..
Peafely ialoslie denand ciovg
DD
Ed =o
P

Psice
p

4f o chonge in Poice does hot atng dbout

anychangá loman d hen t îs
 calld Renfecly tnelaste danand.
The guan Hly dem dhded acmáâns fied , What cva
he Poice hight be.
Sn Bis case DD ddmahd cuave Sil bo Voatde
Voo Bclo
stautgkt line Paallel o Y- a's as shouh in
line onalel
Ais diag20m.
diag man oveh. bough
bho Psice has
incocascd faom of o op, he demand gehaitw
constant.
’ Henco tis diagnah 10P0se hts constont demand
Psice ino0ase fronm op to OP hen
domand 9n0m ins same. Sh olbog 0ds he 0s Ponse
of denand to change in pofice ts il.
C0se Ed=0
3.
Relaiuely elaste Demand cuoNe
D
P
Ed>1
Psice

Demond
’ 4f he Poopoalionale change in he dehmand
is mone lban he trotenbonade chan ge in e
Patce, it is called aclabvely clasc demahd.
Ed >1, DOhmahd cuVe DD ill be flater.
 in demand in
(0a) is noe han hehe chonge in patce PR).
Bhon
’ When Patco falls nom oP to of demahd
in CneosUS

’ the demahd CuUe left o oight of hegatve

CUVe.

Ed <1

Dlndnd
> he Pso foslanate change in he demgnd is
less hon e Pactoskonale chonge in dhe sic
’4 is caled aelalvely inalaslke denand.
This ts shoan n be diagsan. his diagnam,
in be demahd oa) is less Ban be
change in be bice (r)
’4 lenge change in bict lesds to smal dhange
In dehahd Hene Ed>1
’ DOnand (uove l be slee pes uhen Pstce
5. unt alactdty Dlmand
Ed = o
P

bice

Damond

The
’
change in demand
Change in oico . 4! is
is eracdy aqudl to be
knoun as unt alasticity
of demand.
’ uheo oth change in Price and change in
demahd o0 equal Ed-1 ahd dlasiiey "if satd
to be uriy
’ Dhen Paice falls f10m OP to of, demand incLAse
fom oQ to oQ
Thus a in Poice has 10 sultod in an
qua
change
in dlnahd so Poice daskcty of demand

|5. Define Sncomg dlasticly of Demand. Erumesale

dHllesent Lyres of ineome Elasiaty of Demand.
Sncome elesiily of damand shass he change
in quantty demanded as 4 nesult of change
in inco me.
Shcome dlaskty
of denahd be stated in
his fao the follouhg fomula.
 Sn comg closlicdy : Paofolinate change in he
Auanlty domand of commodiky
Ts of ihcone elasticity
I.Zero in come
2. Nego bue income dlaaticity
3. Unit income
9. Snocome clasticity Gnealen Hhan unity
5. Sncomt dhsticily less ban ority
1.Zero income
daskaily

uolily Demanded
Quonlty denanded s0mains the some
in Come inceases
symbolicalyit can
car be expossld as EY-o

’An inceoome incoeases 90m 0y to oY

Quonliy demon ded never changes.
2. Negoiue ncomg Elasticty
Y D

Ey zol
Sncome

Quanlsty Den anded

’ Jhen incomos inc90a ses , Quan tity
demanded falls.
’ When gcome fals down , Quanity demand încaeaces
’ gn his case, Sncome elaslicity of demand is
negakve ieg EYeo
’ When income incaeases fson oy to oY, , Dlmahd
falls fa0hm 06 t0 00
3. onit treome Elasticity
EY =1
4ncome

Quonlity demardtd
’ Wheh an in c10 0S0S in
îhcome boinys about
fo postion ate incacase in
Quanlity detman ded
’And Bhah income alasteily of damand ts equdl
Lo ohe.
EY=1
’ When tncome Thexeases from oy to oY,
9. Ancome elaslicily Gacades Enan Unity
Ey >1
dncome

Quontly demonded
’ In this. case ,
an in ce ase in Shcome boings
about a moe hon hon PooPolionate ihcodase in
quondity dem an ded
symbo icoally id can be woilleh as EY>1
’ 4 shoo5 kigh income elashcity of domand
Uhen incohe ihcne ases faoh oy to oy, Quantity
deman ded. incocasos fr0m oQ to oQ,
5.Yncome dlo slrcity less than Unity
D
Ey<1)
ncone

ouanlhly denandel
’ When încome incr0ases
quontity dlnah ded also
inescases but less than Proponftondlely
’ In tis cas
Eyc1
 tohat an înceasl in quankity demandod faom
0Q to 0Q:
6. Define C10ss Elasticity of Demand. Enu mamate
diffenent tyres of clastidty of Demand,
CSI0SS

Change in he Poice of one commodity laads

to a change in the qualtty dem an ded of
onohen comno dity
’C90SS lastiity' - Profonlinade change in the
demanded of comno dity x
Psopolionale chonge in he bice of comnodity
) n case of subslitutes
P
foice of
colfe (t9P

oly of tea demanded

clasltity of demand is posiktve in cas
of subslilutes
’Eg: coffee and Tea
lWhen the psice of coffee inceases
demonded of Tea inc90a sls Both 0510
subslitutes.
) Sn cas0 of comp lim ehts
D
p!
P
faico of
Con (s)

Qty of Pelrol dumanded

CNosS
dlastcity of denard is negokue in
Case of Com plinehts.
SUhen Poice of co goes ur
up aom oP to of. .
tne Quanety demanded
demanded ofof Pelool decna ses
Saom oQ to 0Q
i) Sn case of uba0laled comm odidie

dange tn be Psice of ond commo dity

uill hot ffect he quanity demanded of anobe
’ Quantty demanded of como dity '8B
rmains
nchanged due to o change n bhe Potee of
A
A both unadloked gods.
. Define Dem an d fone casing Eluctdale e fackogs
ukech one guvtaning Demand fooe cosbing
Demand fonecasirng is a csucial aspuct of
busingss
de mahd fn a Paoduct sAuice based on
kiskoni cal data meakel trehds and obes fockons
By dccunately fone casling demand business tan
nake înfonmod decisions egoding Psoduc kon ,
ivandony nonag hant . Psicing "and naso uca
allocalton. 4! bales oe!inird oPeabion s and meat
cuslomens beds offeckvely
Factons GoveSning Dema hd Fonecasking
Demand siefcs to ah estimate of
osecasing fes
fulse demand fo le Pooduct.4! is an objec
Eve asseSmah! of he futu90 co l9)s2 of domand
an inpostont
in atcent bnes .fone casting tays
ole in bustness doci Sion -makihg
1. Funclional Natuse of oemand
Monkel dmahd foa a Posdi calo Paoduct
Sauice is hot a
ingle bumbe
funcion of a humbesof facbohs fon tnslance.
Highen voluhes of salas can be 9ualiyed wibh
kglen levels of advess kisiny o) PromoHon effonts
2.
Iyes
Based on bhe Potod undon fonecast Hhe
damand folCas! can bobe too types
) shot un

shot un foacasts coVO9 a pesiod of ohl yean

lon- fun foecasling ang peniod aánging
from ono yoos to 20 yaans .
3. Fond cacking lovel
) Fim lavo)
) Shdustny lovdl
DFiam lewl: Maans estma ing the demand fo
tho Paoducts and seUicas
sOvicas offenad by oa single

) Sneuseay avdl: The aggn0g ale denand eslimated

fon he god and sevice of al he fom
Cons lilutes be ind usloy lavel foaecast
4. Deg90e of onitentoton
’ Demand fmacosts can bo Doakad out basdd on
total sales o Product o SUsUices wise salas
fo a uen ne Pesiod.
5. New Poduct
>4 is nclalively casy to fonecast demand fe
asto Lltshing Products Products ohich aNl
 6. Degnae compolikoh
These may be a single aadon o o few
Ioadens dopondi
and soVices
ng uon be hatine of gocds
|8. Ezamine Vatous hethods of Demahd fone ca sling
Medhods of bemand fose Casking
These ane sir îmfcrtan t metbóds of domand
konucasing They
DSuaveymothods
) staistcal mobods
3) Expect opini on mebods
9 Test hoakeling
5) Conlaolled axpeaimehts
o Tudgemental atoach
Dsuzuey medbods
Undoa Wis medhod. Snfon imaon about be dosines
of bhe cohs h 31 s and opinionhs of oxpes ts ane
collcled by nteavesng Jem.
2) stalislical mebods
slatslical method is ustd fon long aun foecas
ling- Sn hs melhod . slalislical and mathemaical
techhiques aoe used to forecasl demahd.
3) ExRent opinton nethods
S well infoinod pe Sohs d9e called exfents. EXreats
Conslilule yel anothea soICL of nfomation
’ Thene Peason t gehesally hee
gehesally oulside
oKUs ahd bey do not bave any nasted inte
est in he ssults of a Poatcu laa suvay
4. Tost. Meskeling
- 4! is Hkely' hat oinions ven by buyeos,
Salosman ohen expeats nay be, at Anes
ntslea ding This s bhe n8s0h uhy most of be
manufacu05 favou to test Un Psoduct o
S0vice nîn oa Iifted mobket as test un
befoe Bhay laundh eto Produc! nakon oide.
5. Contaolled Expaiments Melhods
contnoled oxPet mehts s0fea to such excn cÂse
Whene some of the majoa delomi nate of dama
aNe nani gulated to sutt to he custondts
th diffea nt asbs and Poufesndhlss . încome
f304ps and such ohes, il1t 1sis fuhos ass undd
hat all ohen facto1s hdmin he same.
6. Judgemahtal dermoach medhod
S When hoh of ho above matnods ane
lated to bhe given Product ssvice,

mansgement has ho allenakve ban usthg

he managaeh!
its ooh judgemart.