Professional Documents
Culture Documents
Introduction To Economics Bsit 5 Semester
Introduction To Economics Bsit 5 Semester
Introduction To Economics Bsit 5 Semester
10
6
Price
0
4 6 8 10 12 14 16 18 20 22
Qd demand
Determinants of demand
Demand for a commodity changes due to number of factors,
following are the factors affecting demand are discussed
below:
Price of given Commodity:
The law of demand states that when the price increases, the
quantity of demand fall on the other hand when prices
decrease, demand will grow. Consumer bases their purchasing
decision on price if all other things are constant.
Income of a consumer:
When income of a consumer increases, he usually buys more
goods which increases demanded also increase. When income
decreases, so will demand.
Continue..
Increases in population:
When there is increase in population, there are more people who
buy the good and as a result the demand increases
Taste of a consumer:
When the consumer’s desires, emotions, or preferences change in
favour of a product, so he buys more and the demand increases.
Likewise, when tastes go against it, that decreases the demand.
Future expectations:
When consumer expect that the price of good and services will
rise, they purchase more goods in order to avoid higher prices
and as a result the demand increases
Change in demand curve
Two types of changes can be occurred in demand curve:
i. Extension and contraction of demand curve (Qd)
ii. Rise and fall of demand curve (demand)
Extension and contraction of demand curve
(Qd)
Extension and contraction of demand curve take place
due to change in the price of goods and services, and
assuming all other factors of demand remains constant.
Extension measure that there is Increase in quantity
demand due to decrease in price of goods and services.
60
Extension of demand
50
40
30
Price
20
10
0
0.5 1 1.5 2 2.5 3 3.5
Demand
Contraction of demand curve represents that there is
decline in quantity demand due to rise in the price of
goods and services.
Contraction of demand
80
70
60
50
40
Price
30
20
10
0
1.5 2 2.5 3 3.5 4 4.5
Demand
Rise and fall of demand curve
The demand for goods and services may change
without change in price but due to change in other
factors.
12 Rise of demand curve
10
8
6
Price
4
2
0
4 5 6 7 8 9 10 11
Demand Fall of demand curve
12
10
6
Price
0
4 5 6 7 8 9 10 11
Demand