“THEORY OF

DEMAND”
INTRODUCTION
• Demand and its type?
• Law of demand.
• Why the demand curve slope downward.
• Elasticity of demand.
 WHAT IS DEMAND?
• Demand is the quantity of a good that consumers are willing and able to purchase at
various prices during a given period of time.

• TYPES OF DEMAND:
• Direct and Derived demand.
• Individual and Market demand.
• Recurring and Replacement.
• Complementary and Competing.
• New and Replacement Demand.
LAW OF DEMAND
• As the price of a good rises ,quantity demanded of that good falls.
• As the price of a good falls ,quantity demanded of that good rises.
• Ceteris peribus.
WHY THE DEMAND CURVE SLOPE
DOWNWARD?
• Law of diminishing marginal utility.
• Income Effect.
• Substitution Effect.
• New Consumers.
• Multiple use of commodity.
ELASTICITY OF DEMAND
• Elasticity of demand is derived as the responsiveness of the quantity of the good to
change in of the variables on which demand depends.

• Price of the commodity.

• Income of the consumer.
• Various other factor.

• DEFINITION: The elasticity of demand measures the response of the demand for
the commodity to change in price.