PRESENTATION

ON
THEORY OF
DEMAND ANALYSIS

By-Gaurav Dhingra
M.B.A 1st Sem.
What is Demand?
 The amount of a particular economic good or
service that a consumer or group of consumers
will want to purchase at a given price. In the
ordinary language demand means desire or
willingness for a commodity. But in economic
terminology demand backed up by enough
money to pay for the goods demanded.
Demand is the desire or want backed up by
money.
Factors Affecting Demand:-
 1-Price of the commodity:- There is a close relationship
between the quantity demanded and the price of the product.
There is a inverse relationship between the price and quantity
demand.
 2-Price of related goods:- Related goods are generally
substitutes and complementary goods.
Ex. Of Substitute goods- Tea and coffee.
Ex. Of complementary goods- Car and petrol.
 3- Income of the consumer:- The ability to buy/purchasing
power of a commodity depends upon the income of the consumer.
When the income of the consumer increases, they buy more and
when income falls they buy less.
 4-Taste and preference of the consumer:- The
demand for the product depends upon taste and
preference of the consumers. Demand for several
product like ice-cream, chocolates, beverages and so on
depends on individual tastes. People with different taste
and habits have different preferences for different
goods.
 5-Size of population:- The size of population is also
another important fact that affects the market demand.
When population increases then demand of the product
will also increases.
Law of Demand:-
The law of demand states that the demand for the
commodity increases when its price decreases
and falls when its price rises, other thing
remaining constant. The law of demand states,
there is inverse relationship between the price
and the quantity
demanded.
Law of demand is based on
certain assumptions:-
 1- There is no change in consumer’s taste and
preference.
 2- Consumer’s income remain constant.
 3- Price of other goods should not be change (price
of substitute and complementary goods).
 4- There should be no substitute for the commodity.
 5- The demand for the commodity should be
continuous.
 6- No change in weather condition.
Exception to the Law of
Demand:-
 1-Law of demand is only a general statement
telling that prices and quantities of a
commodities are inversely related.
 2-There are certain special cases – law of
demand will not hold good.
 3-Certain cases with the increases in price,
quantity demand also increases and with the
fall in price, quantity demand also falls.
 4-In such a case demand curves slopes upward
from left to right.
Law of Demand……..
The law of demand is based on the Law of Diminishing Marginal Utility.
It can be illustrated through a demand schedule, a demand curve
and a demand function. It is divided into:
A- Individual Demand:- Individual demand refers to the demand
for the commodity from the individual point of view- a family,
household or person. Individual demand is a single consuming
entity’s demand.
D= f (p)
B- Market Demand:- Market demand refers to the total demand of
all the buyers taken together. It is an aggregate of the quantity of
product demanded by all the individual buyers at a given price.
D= f (Px, Py, I, T, A, P,)
Px- Price of commodity x, Py- Price of related commodity y
I- Income of consumer, T- Taste of the consumer,
A- Advertisement effect, P- Size of population.
 Individual Demand Schedule

Table. 1 Demand for Oranges by Individual A

Price of Oranges
(Rs) 10 9 8 7 6

Quantity
demanded of 1 3 7 11 13
oranges (dozen)
 Table 2. Market Demand Schedule for orange
Price of Quantity demanded of Oranges by Market
Oranges (Rs. consumers (dozens) Demand or
Per dozen Oranges
A B C D (dozens)

10 1 0 3 0 4
9 3 1 6 4 14
8 7 2 9 7 25
7 11 4 12 10 37
6 13 6 14 12 45
Individual and Market Demand
Curve:-
THANKING
YOU