Demand supply analysis... Explanations for Law of Demand Degree of scarcity of one good relative to another helps determine each good’s relative price Definition of demand includes the “other things constant” assumption Among the “other things” are the prices of other goods Substitution Effect When the price of a good falls, its relative price makes consumers more willing to purchase this good When the price of a good increases, its relative price makes consumers less willing to purchase this good Changes in the relative prices – the price of one good compared to the prices of other goods – causes the substitution effect…you substitute toward the less expensive good.

1. Demand Analysis

14. Individual Demand Schedule for CD Quantity of CD Demanded per Year Price per CD Rs. 20 25 30 20 35 15 40 10 45 8

18. Market Demand Schedule Total Market Demand Consumer C Consumer B Consumer A Price per CD Rs. 50 22 18 20 25 87 31 26 30 20 102 37 30 35 15 116 41 35 40 10 131 46 40 45 8