Demand Analysis - Copy

7/31/2019 Demand Analysis - Copy

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Meaning of Demand :

Demand for a

commodity refers to the quantity of acommodity which a consumer is willing to

buy at a given price in a given period of

time.


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Thus demand involves three essential

elements namely :1. Quantity of a commodity ;

2. Price of the commodity ;

3. The period of time .

According to Benhem,The demand

for anything at a given price is the amountof it, which will be brought per unit of time

at that price.


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For instance,statement like ahouseholds demand for milk is twoliters at Rs. 17 per lit. is not correct and

complete. The meaningful statementwould be that at Rs. 17 per lit. a

household demand for milk is 2 lit.

today because it contains all the three

essential elements of demand.


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TYPES OF DEMAND

1- Individual and Market Demand ;

2- Industry Demand and Company

Demand ;

3- Autonomous Demand and Derived

Demand ;

4- Joint Demand and Rival Demand


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.

Income Demand : It refers to various

quantities of a commodity demanded by aconsumer at various levels of his income,

other things being equal.

The relationship between the incomeand the demand for the commodity is

generally positive, i.e, when income of

consumer rises, demand also rises and

when income falls, demand also falls.


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DIAGRAM

Y

D

y1

INCOME

y

DO Q Q1 X

DEMAND


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PRICE INCOME AND CROSSDEMANDPrice Demand :

It refers to variousquantites of a commodity that an

individual household is willing to buy at agiven market price in a given period oftime. Factors other than the priceaffecting demand for commodity are

presumed to remain unchanged. Therelationship between price and thedemand for commodity is generallyinverse, i.e. when price rises, demand

falls and when price falls, demand rises


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DIAGRAM

Y

D

p

PRICE

p1

DO Q Q1 X

DEMAND


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.

Cross demand :It refers to various quantities

of commodity that a consumer is willing tobuy when price of other related commoditychanges. In other words, it indicatesfunctional relationship between demand for

a particular commodity and the prices ofother related commodities such as:

SUBSTITUTE-When the price for one

commodity falls the demand for an othercommodity, called substitute, also falls.


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DIAGRAM

Y

D

y1

PRICE

OF y

Y

DO Q Q1 X

DEMAND FOR X


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COMPLEMENTARY GOODS :

If the fall

in price of one commodity, raises the

demand for another commodity, the two

goods are called complementaries. Car

and petrol, pen and ink, tea and milk are

some examples of complementary goods.


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DIAGRAM

Y

D

p

PRICE OF

Y p1

DO Q Q1 X

DEMAND FOR X


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FREE GOODS :Change in

price of one commodity has no

effect on the demand of anotherone are considered as free goods

such as clothes and books.


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DIAGRAM

Y

D

PRICE

DO X

DEMAND


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DETERMINANTS OF DEMAND ORFACTORS AFFECTING DEMAND

Price of Commodity, Level of Income,

Tastes and Preferences of

Consumers, Distribution of Wealth,

Government Policy,

Size of Population, of related commodities,

Substitute goods.

Complementary goods.


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The Demand Function

Demand function explains the relationshipbetween the demand for a commodity andthe factors determining demand. The aboveanalysis is presented as demand function inthe form of the following equation:

Dx =f (PX, Pr, Y, T)The equation shows that Demand forcommodity X (DX), is the function(f) of Priceof commodity X(P

X

);Price of relatedgoods(Pr); Income of consumer(Y) andtastes of consumer(T).

Demand Analysis - Copy

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