2. 1. Demand.
2. Desire.
3. Types of demand.
4. Determinant of demand.
5. Law of demand.
6. Law of supply.
7. Interarction between demand and supply.
Topics
3. Demand
Amount of a commodity or services
which an individual buyer is willing and
able to purchase at a given price
during a certain period of time.
A desires which is backed up by
willingness and ability to pay.
Mathematically:
Qd=f(P, Pa, Pb ,T, Y, Sp……..etc)
4. Desire
Desire is a wish to have something.
Resource is not essential to have desire.
Desire has no limitation.
For example: a beggar might have desire to visit USA.
5. Types of demand
1. Price of demand.
2. Income demand.
3. Cross demand.
4. Joint demand.
5. Composite demand.
6. Other thing remaining same, price demand
refers various quantities of a commodity which a
consumer would demand at various level of
prices of the commodity.
It shows the inverse relationship between price
and quantity demanded.
Mathematically, DX=f(PX)
Price demand.
8. Income demand
• Income demand shows the relationship between
consumer’s income and quantity demanded for a
commodity. It include various quantities of the commodity
which are bought at various levels of income, other things
remaining the same.
• In the case of the normal goods, it shows positive relation
between price and quantity demanded
• In the case of inferior goods, it shows negative relationship
between income and quantity demanded.
9. 0
100
200
300
400
0 20 40
Price
Normal goods
0
100
200
300
400
0 20 40Price
Inferior goods
Income of consumer Quantity demanded for
normal goods
Quantity demanded for
inferior goods
100 10 30
200 20 20
300 30 10
0
100
200
300
400
0 20 40
Price
Normal goods
10. Cross demand
o Cross demand shows the relationship between price of
commodity and quantity demand of its related commodity,
other things remaining same.
o In the case of substitute goods, it shows the positive
relationship between price of commodity and quantity of its
substitute goods.
o In the case of complementary goods, it shows the inverse
relationship between price of commodity and quantity of its
complementary goods.
12. Joint demand.
If different commodities are demanded for a single purpose it is
called joint demand.
The demand for complementary goods is joint demand because
complementary goods and demanded jointly to satisfy a want.
Composite demand.
o In our daily life some good are used for multiple purposes.
o Demand for such goods is known as composite demand.
13. Price of the
commodity
Income of the
consumer
Price of
related goods
Taste, habit and
preference
Season
Occasional
events
Population
Advertisement
and other
information
Future
expectation
Determinants of demand
14. Law of demand
It was propounded by Alfred Marshall.
It shows the relationship between price of commodity and quantity
demanded for the commodity by a consumer, other things remaining
constant.
It shows the inverse relationship between price and quantity
demanded for the commodity.
mathematically , law of demand can be expressed as:
DX =f(PX)
15. ASSUMPTIONS
Income of the consumer should remain
constant.
Consumer taste and preference should
remain commodity.
Size of the population should remain
constant.
Prices of related goods should remain
constant.
No expectation of future changes in the price
of the commodity.
17. Law of supply
It shows the relationship between price and quantity supplied, other
things remaining the same.
There is direct and positive relationship between price and quantity
supplied.
Mathematically, law of supplied ca be expressed as follows:
SX=f(PX)
18. Assumptions
No change in price of input or factors of productions.
No change in state of technology.
No change in goal of producers.
No change in number of producers.
No change in price of other goods.
No change in tax and subsidy policy of the government.
20. Interaction between Demand and Supply (Market
Equilibrium)
Ricardo and his followers believed that supply slide side determines the
price of product.
But Marshall said that demand and supply determine the equilibrium price
and output of the economy.
Equilibrium price is the price at which quantity demanded and supplied
are equal.
