CH- 3 DEMAND

DESIRE /WANT/ DEMAND

DESIRE
MEANING
Desire means a mere wish to have a commodity.
For example, desire of a poor person for a car with
just Rs 200 in his pocket.
So, desire is just a wish to possess something.
WANT
MEANING
Want is that desire which is backed by the ability and
willingness to satisfy it. Every desire is not a want . But, a
desire can become a want, if the person is in a position to
satisfy it.
For example, in the above example , if the poor person wins a
lottery and now he has enough money to buy a car, then his
desire for car will now be termed as want.
MEANING
Demand is the quantity of a good that
consumers are willing and able to
purchase at various prices during a
given period of time.
Demand is an extension to want as it has two characteristics:
1) Demand is always defined with reference to price: The demand for a
commodity is always stated with reference to its price. With a change in price,
quantity demanded may also change as more is demanded at lower price and
less at higher price.
2) Demand is always with respect to period of time: Demand is always
expressed with reference to time. Even at the same price, demand may change,
depending upon the time period under consideration. For example, demand for
umbrellas is more in rainy season as compared to other seasons.
Thus the element of demand highlights four essential elements of demand:
i. Quantity of the commodity
ii. Willingness to buy
iii.Price of the commodity
iv.Period of time
DEMAND
FEATURES
Features of Demand of a commodity are:
1) Demand depends upon utility of the commodity. A consumer is
rational and demands only those commodities which provide
utility.
2) Demand always means effective demand i.e., desire to own a
commodity should always be backed by purchasing power and
willingness to spend.
3) Demand is a flow concept, i.e., different quantities at different unit
of time.
4) Demand means demand for final consumer goods.
5) Demand is a desired quantity. It shows consumer’s wish or need
to buy the commodity.
GUESS !!!WHAT FACTORS AFFECT DEMAND
FOR COLD DRINK
 DEMAND
FUNCTION
MEANING
 DETERMINANTS OF DEMAND
OR
DEMAND FUNCTION
Demand function shows the relationship between
quantity demanded for a particular commodity and
the factors influencing it.
It can be either respect to one consumer (Individual
demand function) or to all the consumers in the
market (market demand function).
INDIVIDUAL DEMAND
FUNCTION
MEANING
INDIVIDUAL DEMAND FUNCTION
Individual demand function refers to the functional relationship between
individual demand and the factors affecting individual demand.
It is expressed as

DX=f(Px, Pr, Y, T, F)
Where,
Dx=Demand for commodity x;
Px=Price of the given commodity x;
Pr=Prices of related Goods(substitute/complementary goods)
Y=Income of the consumer;
T=Tastes and Preferences;
F=Expectations of change in Price in future.
 DEMAND
SCHEDULE
MEANING
Demand schedule is the tabular statement of different quantities of a
good bought of different prices of a particular moment of time.
Demand schedule exhibits the relationship between the amounts of
a commodity at different possible prices. Thus a demand schedule
shows two columns namely amount demanded of a commodity and
their corresponding prices.
Consumer buys more at fewer prices and less at high price. This fact
is revealed by demand schedule. A demand schedule is of two types:
individual demand schedule and market demand schedule
INDIVIDUAL DEMAND SCHEDULE
An individual demand schedule shows different quantities of a commodity
bought by an individual consumer at different possible prices. The reaction of an
individual towards the commodities at their corresponding prices is reflected by
an individual demand.
A tabular statement showing the quantities of a given commodity which a
consumer is willing to buy at all possible prices within a given period of time.
Price Quantity
Demanded
1 4

2 3

3 2

4 1
LINEAR DEMAND SCHEDULE (STRAIGHT LINE DEMAND CURVE)
MARKET DEMAND
FUNCTION
MEANING
MARKET DEMAND FUNCTION
Market demand function refers to the functional relationship between market
demand and the factors affecting market demand.
Market demand is affected by all factors affecting individual demand. In
addition, it is also affected by other factors like size and composition of
population, season and weather and distribution of income.
It can be expressed as

Dx=f(Px, Pr, Y, T, F, PO, S, D)

Where,
PO=Size and Composition of population;
S = Season and Weather
D=Distribution of Income
MARKET DEMAND SCHEDULE
&
MARKET DEMAND CURVE

MEANING
 Market Demand Schedule:-
A market demand schedules depicts various quantities of a commodity in the
market at different prices in a given point of time. A demand schedule can be
graphically represented. The graphical representation of demand schedule is
known as demand curve. A demand curve can be drawn either on the basis of an
individual demand schedule or on the basis of a market demand schedule.

The horizontal axis measure quantity of a commodity and the vertical axis
measures the price of it. By plotting different points of price-quantity combinations
we get a curve which slopes negatively from left to right. This curve is the demand
curve.

Tabular statement showing the amounts of a commodity demanded by all the

consumers in the market at all possible prices within a given period of time.
 MARKET DEMAND
Price (Rs.) A’s demand B’s demand Market
SCHEDULE Demand

1 4 5 9
2 3 4 7
3 2 3 5
4 1 2 3
Steeper Steeper Flatter curve
curve curve
 FACTORS
AFFECTING
DEMAND
OR
 DETERMINANTS OF DEMAND (INDIVIDUAL
DEMAND)
I. Price of the commodity
Price of the commodity and its demand shares an inverse
relationship. As per law of demand, if other factors are
constant, price and demand move in an opposite
direction. When price rises demand falls and when price
falls demand rises.
Impact on Demand
II. Price of related goods
Goods are said to be related when change in price of one good affects the
demand for the other good. These goods are of two types:
a) Substitute Goods: Substitute goods are those goods which can be used in
place of each other. For example: Tea and Coffee, Coke and Pepsi. They are
capable of providing same level of satisfaction to the consumer in the
absence of any of one good.
Price of a good and demand for its substitute share a direct
relationship. When price of a good rises demand for its substitute also
rises as it becomes relatively cheaper. Example: If price of tea increases
demand for coffee will also increase as coffee becomes relatively
cheaper. The following diagram indicates direct relationship between
price of tea and demand for its substitute (coffee).
 
 
 
 
 Impact on Demand
◦ An increase in the price of substitute good leads to an increase in the demand for
given commodity and vice versa
◦ DIRECT RELATIONSHIP – Px ↑ Qy ↑
b) Complementary Goods: Complementary goods are those
goods which are used together to satisfy a given want. There is an
inverse relationship between price of a good and demand for its
complementary good. Example: when price of ink increases,
demand for ink pen will fall, on the other hand, when price of ink
falls demand for ink pen will rise.
 Impact on Demand
◦ An increase in the price of complementary goods leads to a decrease in the
demand for a given commodity and vice versa
◦ INVERSE RELATIONSHIP - Px ↑ Qy ↓
 Let’s Differentiate between

SUBSTITUTE GOODS COMPLEMENTARY GOODS

◦ They refer to those goods which ◦ They refer to those goods which
can be used in place of one another are used together to satisfy a
to satisfy a particular want. particular want.
◦ They have competitive demand. ◦ They have Joint demand
 Let’s Differentiate between
SUBSTITUTE GOODS COMPLEMENTARY GOODS
◦ Price of one substitute good has ◦ Price of a complementary good
positive relationship with has negative relationship with
quantity demanded of another quantity demanded of another
substitute good complementary good.
◦ Example:- tea and sugar
◦ Example:-Tea and coffee ◦ Car and petrol.
◦ Coke and pepsi
FEW MORE EXAMPLES
III) Income of the consumer: The relationship between income
of the consumer and demand for a good depends upon the fact that
whether the good is normal good or an inferior good.
Normal goods are those goods whose demand increases with an
increase in income of the consumer. Hence, such goods indicate
direct relationship between income of the consumer and demand for
a good. (POSITIVE INCOME EFFECT)
Inferior goods, on the other hand, are goods whose demand
decreases with an increase in income. This is because with an
increase in income a consumer wish to buy superior products. Thus
there is an inverse relationship between income of the consumer
and demand for an inferior good. (NEGATIVE INCOME EFFECT)
NORMAL VS INFERIOR
NORMAL Vs INFERIOR
IV) Taste and Preferences of the consumer: Taste and
Preferences of a consumer have a significant impact on demand.
With the passage of time changes occur in the taste and preferences
of the consumer.
A consumer may develop favourable tastes and preferences for a
particular good. In such a case demand for that good increases.
On the other hand, if consumer develops unfavourable taste for a
particular good demand for that good will fall. For example:
consumers now-a-days buy smart phones with touch screen instead
of traditional bar phones.
 
TASTE AND PREFERENCES
FAVOURABLE UNFAVOURABLE
TASTE TASTE

IN FASHION NOT IN
FASHION,
TASTE,HABITS TASTES

DEMAND WILL DEMAND WILL

RISE FALL
V) Expectation of change in the price in Future: If the
price of a certain commodity is expected to increase in near
future, then people will buy more of that commodity that
what they normally buy. There exists a direct relationship
between expectation of change in prices in future and
change in demand in current period. For example, if the
price of petrol is expected to rise in future, its present
demand will increase.
 FUTURE EXPECTATIONS ABOUT
PRICES

RISE FALL
PEOPLE WILL
BUY PEOPLE WIL BUY
LESS NOW
MORE NOW
MORE DEMAND LESS DEMAND
LIKE PETROL LIKE GOLD
MARKET
DEMAND
DETERMINANTS
Click icon to add picture DETERMINANTS
OF
MARKET
DEMAND
Dx=f(Px, Pr, Y, T, F, PO, S, D)
Where,
Dx=Demand for commodity x;
Px=Price of the given commodity x;
Pr=Prices of related
Goods(substitute/complementary goods)
Y=Income of the consumer;
T=Tastes and Preferences;
F=Expectations of change in Price in future.
PO=Size and Composition of
population;
S = Season and Weather
D=Distribution of Income
 DETERMINANTS OF DEMAND (MARKET DEMAND)
Market demand is influenced by all the factors affecting individual demand for a
commodity. In addition, it is also affected by the following factors:
1) Size and composition of population: Increase in population raises the
market demand, while decrease in population reduces the market demand.
Composition of population, i.e. ratio of males, females, children and number of
old people in the population also affects the demand for a commodity.
2) Season and Weather: The seasonal and weather conditions also affect the
market demand for a commodity. For example: during winters, demand for
woollen clothes and jackets increases, whereas, market demand for raincoat and
umbrellas increases during the rainy season.
3) Distribution of Income: If income in the country is equitably distributed,
then market demand for commodities will be more. However, if income
distribution is uneven, i.e., people are either very rich or very poor, then market
demand will remain at lower level.
 LAW OF
DEMAND
STATEMENT
 LAW OF DEMAND
There is a definite inverse relationship between the price of the good and the quantity
demanded of that good. It is a qualitative statement showing the direction of change.
Symbolically,
Dx=f(Px), ceteris paribus
Where,
Dx= quantity demanded of good X
P= Price of the good X
To understand the influence of factors affecting demand on quantity demanded we use partial
equilibrium analysis, developed by Alfred Marshall. In this analysis, quantity demanded is made
a function of any one factor affecting demand and the other three factors are assumed to remain
constant. For this the latin phase Ceteris Paribus, meaning other things being equal, is used.
Keeping other factors constant, the relationship between price and quantity demanded of a good
is called the law of demand. It states that , if a consumer’s demand for a good moves in the same
direction as the consumer’s income, the consumer’s demand for that good must be inversely
related to the price of the good.
ASSUMPTIONS
LAW OF DEMAND
 Assumptions of the law of Demand
The law is valid only when the following assumptions hold:
1)The price of the related goods (substitutes and
complementary) remains the same.
2)The income of the consumers remains unchanged.
3)Tastes and Preferences of the consumers remain the same.
4)There is no expectation of change in price in the future.
 Important facts about Law of Demand
1. Inverse Relationship: It states the inverse relationship between price and
quantity demanded. It simply affirms that an increase in price will tend to
reduce the quantity demanded and a fall in price will lead to an increase in
the quantity demanded.
2. Qualitative, not Quantitative: It makes a qualitative statement only, i.e.
it indicates the direction of change in the amount demanded and does not
indicate the magnitude of change.
3. No Proportional Relationship: It does not establish any proportional
relationship between change in price and the resultant change in demand. If
the price rises by 10%, quantity demanded may fall by any proportion.
4. One-Sided: Law of Demand is one sided as it only explains the effect of
change in price on the quantity demanded. It states nothing about the effect
of change in quantity demanded on the price of the commodity.
 LAW OF
DEMAND
REASONS FOR OPERATION
 LAW OF DMU
(DIMINISHING MARGINAL UTILITY)
◦ Law of diminishing marginal utility states that, as we consume more and more
units of a commodity, the utility derived from each successive unit goes on
decreasing. So, demand for a commodity depends on its utility. If the consumer
gets more satisfaction, he will pay more. As a result, consumer will not be
prepared to pay the same price for additional units of the commodity. The
consumer will buy more units of the commodity only when the price falls.
◦ Law of DMU is considered as the basic reason for the operation of law of
demand.
 LAW OF DIMINISHING MARGINAL
UTILITY
Demand for a commodity depends upon on its utility

As per Law of diminishing marginal utility, the satisfaction keeps on

decreasing

As a result, consumer will not be prepared to pay the same price for additional unit
of the commodity

MUx = Px
2. Substitution Effect –
Substitution effect refers to substituting one commodity in place
of other when it becomes relatively cheaper. When the price of the
given commodity falls, it becomes relatively cheaper as compared
to its substitutes. As a result, demand for the given commodity
rises.
For example- if price of commodity say coke falls with no
change in price of its substitute say pepsi then pepsi will
become relatively expensive as a result people buy less of
pepsi and thus demand for coke will rise. The change in
demand due to change in relative prices is called
substitution effect.
3. INCOME EFFECT
Income effect refers to effect on demand when real income of the
consumer changes due to change in price of the given
commodity. When price of given commodity falls it increases
the purchasing power (real income)of the consumer. As a result,
he can purchase more of the given commodity with the same
money income.
For example-
Suppose Isha buys 4 chocolates at Rs.10 each with her
pocket money of Rs. 40. If thr price of chocolate falls to
Rs. 8 each, then with the same money income, Isha can
buy 5 chocolates due to an increase in her real income.
4. Additional Customers-
When the price of a commodity falls, many new customers,
who were not in a position to buy it earlier due to its high
price, starts purchasing it. In addition to new customers ,old
consumers of the commodity start demanding more due to its
reduced price.
For example- if price of ice-cream family pack falls from
Rs. 100 to Rs. 50 per pack, then many consumers who
were not in a position to afford ice-cream earlier can now
buy it with decrease in its price. Moreover, the old
customers of ice-cream can now consume more. As a
result its total demand increases.
ADDITIONAL CONSUMERS

NEW
CONSUMERS OLD
(Who were not CONSUMERS
in a position to ( can now start
afford the demanding more
product earlier, due to its
Start purchasing reduced price.)
it)
5. Different Uses-
Some commodities like milk, electricity, etc. have several
uses of which are more important than the others. When
price of such a good (say, milk) increases, its uses get
restricted to the most important purpose(say drinking)
and demand for less important uses (like cheese, butter,
etc.) gets reduced. However, when the price of such a
commodity decreases, the commodity is put to all its
uses, whether important or not.
 DIFFERENT USES
◦ SEVERAL USES OF COMMODITIES

MILK CHEESE BUTTER

When price of milk increase, its uses gets restricted

To the most important uses.

Pmilk Qd milk
 LAW OF
DEMAND
EXCEPTIONS
Click icon to add picture
 EXCEPTIONS TO THE LAW OF DEMAND
As a general rule, demand curve slopes downward, showing the inverse relationship
between price and quantity demanded. However, in certain special circumstances, the
reverse may occur, i.e. a rise in price may increase the demand. These circumstances are
known as ‘ Exceptions to the Law of Demand’.
Some of the important Exceptions are:
1. 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. For example, in our country, it is often seen that when price
of course cereals like jowar and bajra falls, the consumers have a tendency to spend less
on them and shift over to superior cereals like wheat and rice. This phenomenon,
popularly known as ‘Giffen’s Paradox’ was first observed by Sir Robert Giffen.
2. Status Symbol Goods or Goods of Ostentation: The exception relates to certain
prestige goods which are used as status symbols. For example, diamonds, gold, antique
paintings, etc. are brought due to the prestige they confer upon the possessor. These are
wanted by the rich persons for prestige and distinction. The higher the price, the higher
will be the demand for such goods.
3. Fear of Shortage: If the consumers expect a shortage or scarcity of a
particular commodity in the near future, then they would start buying more
and more of that commodity in the current period even if their prices are rising.
The consumers demand more due to fear of further rise in prices. For example,
during emergencies like war, famines, etc., consumers demand goods even at
higher prices due to fear of shortage and general insecurity.
4. Ignorance: Consumers may buy more of a commodity at a higher price
when they are ignorant of the prevailing prices of the commodity in the market.
5. Fashion related goods: Goods related to fashion do not follow the law of
demand and their demand increases even with a rise in their prices. For
example, if any particular type of dress is in fashion, then demand for such
dress will increase even if its price is rising.
6. Necessities of life: Another exception occurs in the use of such
commodities, which become necessities of life due to their constant use. For
example, commodities like rice, wheat, salt , medicines etc. are purchased even
if their prices increase.
7. Change in Weather: With change in season or weather, demand
for certain commodities also changes, irrespective of any change in
their prices. For example, demand for umbrellas increases in rainy
season even with an increase in their prices.
8. Demonstration effect: Sometimes, a section of society tends to
imitate the consumption pattern of higher income groups or some
popular film star. In this case, the law of demand gets violated
because people demand more of that commodity which the upper
class people are buying, even at higher prices.
9. Emergency: In case of emergencies like war, curfew, drought or
famine, the law of demand does not hold. In such situations, there is
general insecurity and fear of shortage of necessities. Hence,
consumers demand more goods even at higher prices.
 MOVEMENT ALONG A
DEMAND CURVE
(CHANGE IN QUANTITY
DEMANDED)
MEANING
 Movement- a movement along a demand curve is caused by change in the
price of the good other things remaining constant. It is always along the same
demand curve, that is no new demand curve is involved.it can be of two
types;
EXPANSION and CONTRACTION
Change in Price will have the following effects:-
• Contraction/upward
When
 
  price rise
movement of demand
  curve
 
 
When • Expansion/downward
 
 
price movement of demand
  falls curve
 
 
 
EXPANSION OF DEMAND- It refers to rise in
demand due to fall in price of the good.

CONTRACTION OF DEMAND-
It refers to fall in demand due to rise in the price of
the good.
 • Price
Contractio rises
n in • Deman
Demand d falls

• Price
Expansio falls
n in • Demand
Demand rises
SHIFT IN DEMAND CURVE
(CHANGE IN DEMAND)

MEANING
 SHIFT IN DEMAND
◦ When the demand of a commodity changes due to change in
any factor other than the own price of the commodity, it is
known as CHANGE IN DEMAND

Leftward
Shift Rightward
Shift
 CHANGE IN DEMAND
Change in Factors other than Price will have the following effects:-
Due to
favourable • Increase/Rightward
change in other
factors at the
same Price
shift in demand
Due to
unfavourable
change in other
•Decrease/Leftwar
factors at the
same Price d shift in demand
INCREASE IN DEMAND: It refers to more
demand at a given price.
The causes of increase in demand are:
a. Increase in the income of the consumer in case of
normal goods
b. Decrease in the income of the consumers in case of
inferior goods.
c. Increase in the price of the substitute goods.
d. Fall in the price of the complementary goods.
e. Consumer taste becoming stronger in favour of the
good.
RIGHTWARD /INCREASE IN DEMAND
DECREASE IN DEMAND:
 
It refers to less demand at the given price. It occurs due
to unfavourable changes in factors other than the price of
the good. The causes of decrease in demand are:
a.Fall in the income of the consumer in case of normal goods.
b.Rise in the income of the consumer in case of inferior goods.
c. Fall in the price of the substitute goods.
d.Rise in the price of the complementary goods.
e. Consumers taste becoming unfavourable towards the goods.
LEFTWARD /DECREASE IN DEMAND
EXPANSION IN DEMAND
V/S
INCREASE IN DEMAND
DIFFERENCE
 • Increase in demand refers to

INCREASE IN
DEMAND
• When the Quantity
EXPANSION IN
DEMAND

demanded rises due to a a rise in the demand of a

decrease in the price, commodity caused due to any
keeping other factors factor other than the own
price of the commodity.
constant, it is known as
• There is a rightward shift in
expansion in demand.
demand curve.
• There is a downward • It occurs due to favourable
movement along the same change in the other factors
demand curve. like increase in the prices of
• It occurs due to a decrease substitutes, decrease in the
in the price of the given prices of complementary
commodity. goods, increase in income in
case of normal goods, etc.
CONTRACTION IN DEMAND
V/S
DECREASE IN DEMAND
DIFFERENCE
 • Decrease in demand refers to

DECREASE IN
DEMAND
• When the Quantity
demanded falls due to an a fall in the demand of a
DEMAND

increase in the price, keeping commodity caused due to any

other factors constant, it is factor other than the own
CONTRACTION IN

known as contraction in price of the commodity.

demand. • There is a leftward shift in
• There is an upward demand curve.
movement along the same • It occurs due to an un-
demand curve. favourable change in the
• It occurs due to an increase other factors like decrease in
in the price of the given the prices of substitutes,
commodity. increase in the prices of
complementary goods,
decrease in income in case of
normal goods, etc.
THE MOVEMENTS ALONG THE SAME
DEMAND CURVE
V/S
SHIFT IN THE DEMAND CURVE:

DIFFERENCE
 SHIFT IN DEMAND
• When the Quantity • When the demand changes
demanded changes due to a due to change in any factor
MOVEMENT ALONG
DEMAND CURVE

change in the price, keeping other than the own price of

other factors constant, it
leads to a movement along
the same demand curve.
• The movement along the
same demand curve is either
upwards (known as
contraction in demand) or
downwards (known as
expansion in demand).
• It occurs due to an increase
or a decrease in the price of
the commodity, it leads to a
shift in the demand curve.
• Shift in the demand curve is
either rightwards (known as
Increase in demand) of
leftwards (known as decrease
in demand).
• It occurs due to change in
other factors like change in
prices of substitutes, change in
prices of complementary
goods, change in income, etc.
 CROSS PRICE EFFECT
OR
EFFECTS OF CHANGE IN PRICE OF
RELATED GOODS ON DEMAND OF
A COMMODITY
  
 
Other things being equal, the effect of
change in price of a related good on the
demand for a given commodity is called
cross price effect. Related goods can be
substitute or complementary goods .
Effect Of Change In The Price Of Substitute Good:
a.Increase in the price of substitute good: If the price of the
substitute good(say pepsi)increases, then the demand for the given
commodity(say coke)will rise because it becomes relatively cheaper.
Consumers may now substitute some coke in place of pepsi. An
increase in the price of the substitute (pepsi) shifts the demand
curve of the given commodity (coke)to the right.
 
b. Decrease in the price of substitute good: If the price of
substitute good(say pepsi)decreases, then the demand for the given
commodity(say coke)will fall because it becomes relatively costlier
than before. A decrease in the price of substitute(pepsi)shifts the
demand curve of the given commodity(coke)to the left.
If Px(tea) rises, Dy(coffee) rises (fig1)
If Px(tea) falls, Dy(coffee) falls (fig2)

This shows that there is a direct relation

between price of a good and demand of
its substitute good.
Question: If question asks you to show
the change in demand of coffee, when
the price of tea increases?........(fig1)
Solution: If the price of tea rises, people
will shift their demand to coffee, since
both the tea and coffee are substitute
goods. Hence, demand curve of coffee
will shift rightwards. (Increase in
demand).
Note: When you will plot the demand for
coffee, you will take quantity demanded
of coffee on X-axis and Price of Coffee
on Y-axis.
EFFECT OF CHANGE IN THE PRICE OF COMPLEMENTARY
GOOD:
 A change in price of complementary goods changes the demand for the other
good in opposite direction.
 
a. In price of complementary good: If the price of the complementary
good(say petrol)rises, then the demand for the given commodity(say car)will
fall. It is because, people now would buy less cars even when the price itself
remains the same. Thus, the demand curve of car will shift to the left.
 
b. Decrease in price of complementary goods: If the price of the
complementary good(say petrol)decreases, then the demand for the given
commodity(say cars)will increase. It is because that people will now buy more
cars even when price of the cars is the same. The demand curve of cars will shift
to right.
If Px(pen) rises, Dy(ink) falls(fig1)
If Px(pen) falls, Dy(ink) rises (fig2)

This shows that there is a indirect relation between

price of a good and demand of its complementary
good.
Question: If question asks you to show the change in
demand of ink, when the price of pen rises?........
(fig1)
Solution: If the price of pen rises, people will reduce
their demand for ink, since both the pen and ink are
complementary goods. Hence, demand curve of ink
will shift leftwards. (decrease in demand)
Note: When you will plot the demand for ink, you
will take quantity demanded of ink on X-axis and
Price of ink on Y-axis.
EFFECT OF CHANGE IN INCOME (INCREASE) ON
DEMAND FOR NORMAL GOOD
A normal good is one whose demand
increases with the increase in income and
decreases with decrease in income.

a. Increase in income: If the income

of the buyers increases then the
demand for the normal good will
increase shifts the demand curve
of the good to right. (Rightward
Shift).
EFFECT OF CHANGE (DECREASE) IN INCOME ON
DEMAND FOR NORMAL GOOD

b. Decrease in income: If the consumer

money income decreases, then the
demand for the normal good falls. In
such situation, the new demand curve
will shift to the left. (Leftward Shift)
 EFFECT OF CHANGE (INCREASE) IN THE
INCOME ON DEMAND FOR AN INFERIOR GOOD

 
An inferior goods whose demand decreases
when income of its consumer rises and vice-
versa.
 
a. Increase in income: When income of
buyer rises, less quantity of it will be
demanded by him, because he will shift
over to some superior good. Therefore an
increase in income in income shifts the
demand curve of the inferior goods to the
left(Leftward Shift) and vice-versa.
 EFFECT OF CHANGE (DECREASE) IN THE
INCOME ON DEMAND FOR AN INFERIOR
GOOD

b. Decrease in income: If consumers money

income decreases, then the demand for the
inferior good will rise. It is because , he will
now be left with less amount of money to
spend on superior goods. So to compensate
the quantity of superior good, he will have to
buy more of the inferior good. A decrease in
income, thus shifts the demand curve to the
right.
NORMAL GOOD
V/S
INFERIOR GOOD
MEANING
 INFERIOR GOODS
• Normal goods refer to • Inferior goods refer to
NORMAL GOODS

those goods whose demand those goods whose demand

increases with an increase decreases with an increase
in income. in income.
• Income effect is positive in • Income effect is negative
case of normal goods. in case of inferior goods.
• There is a direct relation • There is an inverse
between income and relationship between
demand for normal goods. income and demand for
• ‘Full Cream Milk’ is a inferior goods.
normal good if its demand • ‘Toned Milk’ is an inferior
increases with an increase good if its demand
in income. decreases with an increase
SLOPE OF DEMAND CURVE
◦ SLOPE OF DEMAND CURVE=

CHANGE IN PRICE
CHANGE IN QUANTITY

 Due to inverse relationship between price and demand,

the demand curve slopes
 Downwards and
 the slope is Negative
SLOPE OF DEMAND CURVE
DEMAND EQUATION
Qd = a – bp
Where, a = demand when the price is equal to zero
-b = slope of the demand curve
Qd = 25 – 5 p
25 = the quantity when demand is zero
-5 = slope of the demand curve
( here, when price increases by one unit, demand falls by 5
units)
THANK YOU!!