Presentation
on
DEMAND ANALYSIS
by
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Dr. Manoj Dolli
Topics to Discuss Discuss:
1. Meaning
of Demand 2. Determinants of Demand 3. Law of Demand 4. Exceptions to the Law of Demand 5. Elasticity of Demand
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1. MEANING OF DEMAND
Demand for a commodity refers to the quantity of the commodity which an individual consumer or a household is willing to purchase per unit of time at a particular price. y Demand for a commodity impliesy
Desire of the consumer to buy the product or service, Willingness to buy the product or service, and Ability to purchase the product or service
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2. DETERMINANTS OF DEMAND
I. General Factors
Price of the Product Income of the Consumer Taste and Preferences of the Consumer Prices of the related goods (substitutes and complementary goods)
II. Additional Factors related to luxury goods and durables
Consumer Expectations of the Future Prices Consumer Expectations of the Future Income.
III. Additional Factors Related to Market Demand
Population Social, Economic and Demographic Factors
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3. LAW OF DEMAND
Law
of Demand states that higher the price, lower the quantity demanded, and vice versa when other things constant.
4. EXCEPTIONS TO THE LAW OF DEMAND
Giffen
Goods Commodities which are used as status symbols Addictive Products Expectations of change in the price of the commodity. Etc
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5. ELASTICITY OF DEMAND
Elasticity of Demand (Ed) is defined as the percentage change in quantity demanded caused by some percent change in the demand determinant under consideration.
TYPES OF ELASTICITY OF DEMAND:
Price Elasticity of Demand Income Elasticity of Demand Cross Elasticity of Demand
PRICE ELASTICITY OF DEMAND
The measure of relative responsiveness of quantity demanded to price; along a given demand curve is known as price elasticity of demand.
TYPES OF PRICE ELASTICITY OF DEMAND:
1. More Price Elasticity of Demand (Ep>1)
Rs.5
Price
Rs.4
50
100
10 Quantity Demand
2. Less Price Elasticity of Demand (Ep<1)
Rs.5
Price
Rs.3
50
75
Quantity Demand
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3. Perfectly Price Elastic Demand (Ep=infinity)
14 12 10 8 6 4 2 D
10
15
20
25
30
Quantity
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4. Perfectly Price Inelastic Demand (E=0)
30 25 20 15 10 5
10
15
20
25
Quantity
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5. Unitary Price Elasticity of Demand (E=1)
Rs.5
Price
Rs.2.5
50
100
Quantity Demand
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Income Elasticity of Demand
y
A measure of the extent to which the demand for a good changes when income changes. % Change in Quantity Demanded % Change in Income
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Cross Elasticity of Demand
y
A measure of the extent to which the demand for a good changes when the price of a substitute or complement changes. % Change in Quantity Demanded % Change in Price of one of its
substitutes or complements
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Thank You
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