Demand

Analysis of Demand
• What is demand?
– Want + Willingness + Ability = Demand

• Law of Demand
“Other things being constant, as price falls, the
quantity demanded rises and vice versa”

• Demand function, schedule and demand

curve

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 Demand Function, Schedule and
Curve
DEMAND SCHEDULE DEMAND CURVE
Price of Quantity 25
Pen (in units) 20
22 0 15

Price (P)
20 10
18 20 10
16 30 5
14 40 0
12 50 0 10 20 30 40 50 60 70 80 90
10 60
Quantity Demanded (Q)
8 70
6 80
Q  f (P)  110  5P
3
 Exceptions to Law of Demand
• Giffen goods
• Veblen effect
• Snob effect
• Expectations

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Other Factors Influencing the Demand

• Prices of related goods

• Substitutes
• Complementary goods
• Population
• Tastes and preferences
• Income of the consumer
• Wealth of the consumer
• Expectations
• Special influences

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Change in Quantity Demanded and
Change in Demand
• Change in Quantity • Change in Demand
Demanded

P1 P1

P2
P2
D2

D1
0
0 Q1 Q2 Q1 Q2
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Individual and Market Demand

Individual and Market Demand Schedule

Price of Shirt
(in Rs.) A B Total
300 0 0 0
275 1 0 1
250 2 1 3
225 3 2 5
200 4 3 7
175 5 4 9
150 6 5 11

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 Individual and market demand
(Graphically)
Market Demand Curve
A's Demand Curve B's Demand Curve

400 400 400

300 300 300

Price (in Rs.)

Price (inRs.)

s.)
200 200 200

Price(inR
100 100 100

0 0 0
0 1 2 3 4 5 6 0 0 1 2 3 4 5 0 1 3 5 7 9 11

Quantity Demanded (uts) Quantity Demanded (uts) Quantity Demanded (uts)