1. Demand
by- Sunit Chakraborty

2. Demand
 Demand refers to the quantities
of a product that purchasers are
willing and able to buy at
various prices per period of time
, all other things being equal.

3. Demand curve
 Definition
 curve that normally slopes downward towards
the right of the chart showing quantity of a
product
 (good or service) demanded at different
price levels.

4. DETERMINANTS OF DEMAND
 Price of the commodity
 Income of the consumers
 Consumers tastes and preferences
 Price of related goods:-
a) substitute goods
b) complimentary goods

5.  Consumers expectations
 Population of the country
 Distribution of income
 Government policy

6. Demand Schedule

7. Demand Schedule and Demand Curve
Price of
Ice-Cream Cone
$3.00
2.50
1. A decrease
in price ...
2.00
1.50
1.00
0.50
0 1 2 3 4 5 6 7 8 9 10 11 12 Quantity of
Ice-Cream Cones
2. ... increases quantity
of cones demanded.
Copyright © 2004 South-Western

8. Shift in demand curve
 The Law of Demand states that the demand curve is
downward sloping.
 When price goes up, there is a decrease in quantity
demanded.
 When price goes down, there is an increase in
quantity demanded.
 There are TWO types of change in demand;
1. Movement ALONG the demand curve
2. SHIFTS in the demand curve.

9. Shift in the demand curve
 A movement ALONG the demand curve
 A movement along the demand curve is caused
by a change in PRICE of the good or service. For
instance, a fall in the price of the good results in
an EXTENSION of demand (quantity demanded
will increase), whilst an increase in price causes a
CONTRACTION of demand (quantity demanded
will decrease).

10. Changes in Quantity Demanded
Price of IceCream
Cones
A tax that raises the price of icecream cones results in a movement
along the demand curve.
B
$2.00
A
1.00
D
0
4
8
Quantity of Ice-Cream Cones

11. Shift in the demand curve
 A SHIFT in the demand curve
 A shift in the demand curve is caused by a
change in any non-price determinant of demand.
The curve can shift to the right or left.
 A rightward shift represents an increase in the
quantity demanded (at all prices), D1 to D2, whilst
a leftward shift represents a decrease in the
quantity demanded (at all prices). D1 to D3

12. Figure 3 Shifts in the Demand Curve
Price of
Ice-Cream
Cone
Increase
in demand
Decrease
in demand
Demand
curve, D2
Demand
curve, D1
Demand curve, D3
0
Quantity of
Ice-Cream Cones
Copyright©2003 Southwestern/Thomson Learning

13. Shift in the demand curve

14. A Change in Demand Versus a Change in Quantity
Demanded
To summarize:
Change in price of a good or service
leads to
Change in quantity demanded
(Movement along the curve).
Change in income, preferences, or
prices of other goods or services
leads to
Change in demand
(Shift of curve).

15. Consumer Income
Normal Good
Price of IceCream Cone
$3.00
An increase in
income...
2.50
Increase
in demand
2.00
1.50
1.00
0.50
D1
0 1
2 3 4 5 6 7 8 9 10 11 12
D2
Quantity of
Ice-Cream
Cones

16. Consumer Income
Inferior Good
Price of IceCream Cone
$3.00
2.50
An increase in
income...
2.00
Decrease
in demand
1.50
1.00
0.50
D2
0 1
D1
2 3 4 5 6 7 8 9 10 11 12
Quantity of
Ice-Cream
Cones

17. Causes of Shift in the demand
curve
The movements can be caused by the following;
 change in consumer income - If consumer
income increases, then consumers buy more
normal/luxury items and the demand curve shifts to
the right.
 Change in the price of other goods - if the price
of a complementary good increases then the
demand for the good will fall. This will result in a
leftward shift in the demand curve of any
complementary good . However, if the price of a
substitute good increases, then the demand for the
other good would increase as consumers switch
their consumption patterns.
 Changes in tastes and fashions - if a good
becomes fashionable then the demand for the good
will shift to the right.