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Demand refers to the qty of commodities demanded by consumers at various…
Demand
refers to the qty of commodities demanded by consumers at various prices during a pat time
Types of Demand
Joint Demand
Products that are correlated
Individual Demand
One household
Market Demand
In bulk
Derived Demand
Production based - base products
Ex ante Ex post
Wants to buy vs what you actually buy
Determinants of Demand
Price
Income
Normal goods
Positive income elasticity
Inferior goods
Negative Income elasticity
Inexpensive necessities
Zero income elasticity
Climate
Demonstration effect
Competition between consumers
Banking Facilities
Easier the loan more the demand for expensive products
Government policies
Subsidiaries - gas cylinder more demand
Taxes - cigarettes less demand
Tastes and Preferences
Distribution of Income
In equal income more luxury items are demanded
Size and composition of population
Different age groups demand different things
Types of goods
Substitute
Tea and coffee
Complimentary
Pen and Ink
Law of Demand
Price of commodity is inversely proportional to demand ceteres barabus
Reasons
Income Effect
Change in demand of commodity results from change in real income of consumer due to change in price of the commodity
Substitution effect
Higher prices pertain to the other good's demand
Number of consumers
Consumers increase at lower prices
Law of Diminishing Marginal Utility
Ceterus parabus, additional quantity of commodity reduces its utility derived
Number of Uses of Commodity
More uses means that it will be used for more things at lower prices, increasing their demand
Exceptions
Emergencies
Veblen goods
Articles of snob appeal
Conspicuous consumption
Giffen Goods
Inferior, bread and meat
When customer loses faith in quality of product
Change in fashion
Expectation of future goods
Change
Contraction
Demand decrease price increase else constant
Upwards arrow to left
Expansion
Price decrease demand increase else constant
Downwards arrow to right
Increase
Demand increase price same other change
Shift to right
Decrease
Demand decrease price constant other change
Shift to left
Elasticity
Degree of responsiveness with respect to some factor
Price
Degree of responsiveness of the qty of commodity w respect to change in price
Unitary elastic
1
Perfectly elastic
inf
Perfectly Inelastic
0
Relatively Inelastic
<1
Relatively Elastic
more than 1
Determinants
Availability of substitute product
more than 1
Distribution of consumer's income
Very exp and cheap are inelastic
Mid range are elastic
Number of uses of commodity
more than 1
Time factor
Short - inelastic
Large - Elastic
Type of Good
Durable - elastic
Perishable - Inelastic
Income
d(product) and income
Normal goods
Demand increases with income
Elastic
Inferior goods
Demand is inverse to Income
Inelastic
Inexpensive necessities
No relation
Cross
Change in price of one changing
demand of another
Substitute and Complimentary
Substitute
Positive
Complimentary
Negative cross elasticity
Unrelated goods
Zero cross elasticity