LAW OF DEMAND

AN OVERVIEW
BY
LALITHA SASANKA G
DEFINITON

The law of demand states that other

factors being constant (cetris peribus),
price and quantity demand of any good
and service are inversely related to
each other. When the price of a product
increases, the demand for the same
product will fall.

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FEATURES OF DEMAND

1) DESIRES AND DEMAND

2) DEMAND AND PRICE
3) POINT OF TIME
4) UTILITY

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OBJECTIVES OF
DEMAND ANALYSIS

1) DEMAND FORECASTING
2) PRODUCTION PLANNING
3) SALES FORECASTING
4) CONTROL OF BUSINESS
5) INVENTORY CONTROL
6) GROWTH AND LONG TERM
INVESTMENT
7) ECONOMIC PLANNING AND POLICY
PLANNING

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ASSUMPTIONS

 NO CHANGE IN CONSUMERS INCOME

 NO CHANGE IN SIZE AND
COMPOSITON OF POPULATION
 NO CHANGE IN CONSUMERS TASTE,
PREFERENCES, ETC.
 NO EXPECTATION OF FUTURE PRICE
CHANGE
 NO CHANGE IN PRICE IN RELATED
GOODS
 NO CHANGE IN TAX POLICY OF THE
GOVERNMENT
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EXCEPTIONS

 VALBEN GOODS
 NECESSARY GOODS
 LUXURY GOODS
 GIFFEN GOODS
 CONSUMERS NEGLIGENCE
 EFFECT OF
DEMONSTRATION
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DEMAND SCHEDULE

 A demand schedule is typically

used in conjunction with a supply
schedule, which shows the
quantity of a good that would be
supplied to the market by
producers at given price levels.
By graphing both schedules on a
chart with the axes described
above, it is possible to obtain a
graphical representation of the
supply and demand dynamics of
a particular market.
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 DIFFERENT DEMAND GRAPHS

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