{"id":68,"date":"2018-10-26T05:00:40","date_gmt":"2018-10-26T05:00:40","guid":{"rendered":"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/?post_type=chapter&#038;p=68"},"modified":"2018-10-26T08:29:12","modified_gmt":"2018-10-26T08:29:12","slug":"demand-and-demand-functions","status":"publish","type":"chapter","link":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/chapter\/demand-and-demand-functions\/","title":{"rendered":"Demand and Demand Functions"},"content":{"raw":"&nbsp;\r\n<p style=\"text-align: justify\"><strong>Learning Outcome<\/strong><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">After completing this module the students will be able to understand:<\/p>\r\n\r\n<ul>\r\n \t<li style=\"text-align: justify\">The concept of Law of Demand<\/li>\r\n \t<li style=\"text-align: justify\">The Demand Curve<\/li>\r\n \t<li style=\"text-align: justify\">Demand function: identifying the relevant variables in a real-world business situation.<\/li>\r\n \t<li style=\"text-align: justify\">Various types of demand in view point managerial economics<\/li>\r\n<\/ul>\r\n&nbsp;\r\n\r\nDownward sloping of demand curve and upward sloping of demand curve.\r\n\r\n&nbsp;\r\n\r\n<strong style=\"text-align: initial;font-size: 1em\">Demand<\/strong>\r\n<div>\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">The demand for a good is consumer\u2019s desire to have it for which he is willing and able to pay. So Desire for certain good or a service which is supported by the capacity to purchase is called demand. Generally people refer to the Want or the Desire for a thing as Demand but in economics they have different meaning. Desire is a wishful thinking. If a man willing to purchase a LED but he has no money to purchase it, then it is only a desire. If he has money with him but he is not ready to spend it, then it will remain his want. And if he has money and is willing to spend it, to buy a LED at a given price at a given period of time then it will become his demand.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">In simple words we can say that demand for a good is the amount of it that a consumer will purchase at a various prices during a period of time. Demand is a quantitative expression of preferences and in fact it is a photographic picture of consumer\u2019s attitude toward a commodity.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">According to Prof. Benham, \u201cThe demand for anything at a given price is the amount of it which will be bought per unit of time at that price \u201c.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">According to Hibdon, \u201cDemand means various quantities of a good that would be purchased per time period at different prices at a given market.\u201d<\/p>\r\n&nbsp;\r\n\r\n<strong>Constituents of Demand:<\/strong>\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">1. Desire for good \/ service<\/p>\r\n<p style=\"text-align: justify\">2. Availability of resources\/Ability to pay<\/p>\r\n<p style=\"text-align: justify\">3. Willingness to pay<\/p>\r\n<p style=\"text-align: justify\">4. At a given price, and<\/p>\r\n<p style=\"text-align: justify\">5. At a given period of time<\/p>\r\n&nbsp;\r\n\r\n<strong>Demand function\/Factors affecting demand<\/strong>\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">Demand function for the commodity explains the relationship between the quantity demanded and factors that influence it. There are many factors which influence the demand for a commodity. Some of these factors are given below:<\/p>\r\n\r\n<\/div>\r\n&nbsp;\r\n\r\n<img class=\"size-full wp-image-72 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-29.png\" alt=\"\" width=\"422\" height=\"394\" \/>\r\n<ol>\r\n \t<li style=\"text-align: justify\"><strong>Price of related good\/service\u2014<\/strong>when change in the price of one good changes the demand of another good then we can say that two goods are related with each other. It is of two types (a) substitute and (b) complementary goods. When price of one good increases the demand of another good it is called substitute goods and when increase in price of one good decreases the demand of another good it is called complementary goods. So substitute goods are positively related and complementary goods are negatively related.<\/li>\r\n<\/ol>\r\n<img class=\"size-full wp-image-73 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-30.png\" alt=\"\" width=\"697\" height=\"283\" \/>\r\n<ol start=\"3\">\r\n \t<li style=\"text-align: justify\"><strong>Income of the consumer<\/strong>---- income of the consumer is an important determinant of demand. More the income of the people more will be the demand. When income of the people increases, they can afford to buy more. So income has a positive effect on demand. People will buy more with increase in income and buy less when income decreases. So income spending on different goods can be classified as under<\/li>\r\n<\/ol>\r\n&nbsp;\r\n<p style=\"text-align: justify\">(a) For Necessities of life: In case of Necessities of life there is no change in demand with the changing level of income level of consumer. We can take an example of salt here. Amount of salt used by the consumer has nothing to do with the change of income. Amount of salt used by the consumer is same irrespective of income. It can be shown with the help of diagram<\/p>\r\n<img class=\"size-full wp-image-74 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-31.png\" alt=\"\" width=\"389\" height=\"279\" \/>\r\n<p style=\"text-align: justify\">(b) For Comforts---comfort goods are those goods which make our lives comfortable. After satisfying necessities of life, people spent money on comforts. Comfort goods are used to maintain or increase efficiency. For example use of AC in summers and heater in winter make life comfortable .In comfort we can include two types of goods ie Normal goods and Inferior goods. For normal good demand always increase with the increase in income so there is always positive relationship between income and quantity demanded. In case of inferior goods demand decreases with the increase of income. So there is inverse relationship it can also be shown with the help of diagram.<\/p>\r\n&nbsp;\r\n\r\n<img class=\"size-full wp-image-75 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-32.png\" alt=\"\" width=\"566\" height=\"340\" \/>\r\n\r\n<img class=\"size-full wp-image-76 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-33.png\" alt=\"\" width=\"498\" height=\"276\" \/>\r\n<p style=\"text-align: justify\">(C) For Luxuries\u2014After satisfying comforts people go for luxuries of life. It is directely related with the income. People will buy more with the increase in income.it can be shown with the help of diagram also.<\/p>\r\n&nbsp;\r\n\r\n<img class=\"size-full wp-image-78 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-34.png\" alt=\"\" width=\"465\" height=\"362\" \/>\r\n<ol start=\"9\">\r\n \t<li style=\"text-align: justify\"><strong>Price of good\/ service---<\/strong>Demand is also influenced by its price. People will buy more at lower prices and but less when prices increase. A fall in price of goods leads to rise in consumers purchasing power<\/li>\r\n \t<li style=\"text-align: justify\"><strong>Quality of the good \/service<\/strong>\u2014Quality of the product also influences demand. Better quality of the product creates more demand.<\/li>\r\n \t<li style=\"text-align: justify\"><strong>Taste and preferences of the consumer<\/strong><strong>---<\/strong> Taste, preferences and fashion also influences demand to a great extent .Demand of a product goes up if consumers have taste and preference for it, and demand goes down if consumers have no taste of the commodity.<\/li>\r\n \t<li style=\"text-align: justify\"><strong>Advertising---- <\/strong>Amount spent on advertisement of product will also influence demand. Advertisement of product increases their sales.<\/li>\r\n \t<li style=\"text-align: justify\"><strong>Weather<\/strong>---weather condition of region also effect demand for a particular product. Demand for umbrellas goes up in a rainy season. On the other hand demand for woollens goes up in winter season.<\/li>\r\n \t<li style=\"text-align: justify\"><strong>Expectations<\/strong>\u2014consumer\u2019s expectations also play a very important role in deciding demand. If consumer expect that prices of the product may rise in future then demand will goes up. On the other hand expectations of fall in prices, will diminish the demand. Similarly if a consumer expect higher income in future, he spend more at present and if he expect lower income in future his demand will goes down.<\/li>\r\n \t<li style=\"text-align: justify\"><strong>Size\/Growth of population--<\/strong>- Demand of the product depends upon the size\/ growth of population also. Larger the size of the population greater will be the demand and vice versa.<\/li>\r\n \t<li style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\">Distribution of income and wealth--<\/strong><span style=\"text-align: initial;font-size: 1em\">--Level of national income and wealth is also very important factor of determining demand. Higher the income more will be the demand and, lower the income lesser will be the demand.<\/span><\/li>\r\n<\/ol>\r\n<strong>LAW OF DEMAND<\/strong>\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">Law of demand describes the general tendency of consumer\u2019s behaviour. It explains the functional relationship between two variables that is price and quantity demanded. Law of demand explains the inverse relationship between price and demand. It means people will buy more at lower prices and buy less when price rises. In other words we can say that when price of the commodity falls, demand for the commodity increases and when price rises, the demand for the commodity decreases.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong>According to Samuelson<\/strong>: \u201c Law of demand states that people will buy more at lower prices and buy less at higher prices, if other things remains the same( ceteris paribus).\u201d<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong>According to Ferguson<\/strong>: \u201cThe quantity demanded varies inversely with price.\u201d<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">So according to law of demand if other things being equal, when price of a commodity falls, quantity demanded of it will rise, and if the price of commodity rise its quantity demanding will decline. These other things which are assumed to be constant are the taste and preferences of consumer, income of consumer, prices of related good, size of population and future expectations of rise or fall in prices.<\/p>\r\n<img class=\"size-full wp-image-79 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-35.png\" alt=\"\" width=\"531\" height=\"440\" \/>\r\n<p style=\"text-align: justify\">ASSUMPTIONS OF THE LAW.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">According to Stigler and Boulding, the law of demand based on the following assumptions:<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">1. There should be no change in the income of consumers.<\/p>\r\n<p style=\"text-align: justify\">2. There should be no change in the taste and preferences of the consumer.<\/p>\r\n<p style=\"text-align: justify\">3. There should be no change in the prices of related goods.<\/p>\r\n<p style=\"text-align: justify\">4. There should be no change in the size of population.<\/p>\r\n<p style=\"text-align: justify\">5. Consumer is a rational consumer.<\/p>\r\n<p style=\"text-align: justify\">6. There should be no expectation of rise or fall in price of related goods in future.<\/p>\r\n<p style=\"text-align: justify\">7. There should be perfect competition in the market.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">Law of demand can be explained with the help of demand schedule and demand curve.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">Demand Schedule----It shows the relationship between price and quantities demanded at different prices.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">Demand schedule can be classified into two categories:<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">1. Individual demand schedule: it shows quantities of commodities demanded by the individual consumer at different prices. It can be shown with the help of following table.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">INDIVIDUAL DEMAND SCHEDULE of person X<\/p>\r\n&nbsp;\r\n\r\n<img class=\"size-full wp-image-80 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-36.png\" alt=\"\" width=\"680\" height=\"121\" \/>\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">From the above table it is seen that consumer X buy more units of commodity A when its prices goes down, and buy less when prices high.<\/p>\r\n\r\n<ol start=\"2\">\r\n \t<li style=\"text-align: justify\"><strong>Market demand schedule<\/strong>--- It shows quantities of commodities demanded by all the consumers in a market. In other words we can say that Market demand schedule is defined as the quantities of a given commodity which all consumers will buy at all possible prices at a given point of time. It can be shown with the help of following table.<\/li>\r\n<\/ol>\r\n<img class=\"size-full wp-image-81 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-37.png\" alt=\"\" width=\"683\" height=\"172\" \/>\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">It is shown in a table that when price is 50 per unit then consumer X\u2019s demand is 10 units, consumer Y\u2019s demand is 15 units and consumer Z\u2019s demand is 5 units of commodity A. So market demand is 30. Similarly at price 40,30,20,and10 per unit total demand by all three is 55,80,105 and 130.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong>Demand curve\u2014<\/strong>demand curve is a graphical presentation of demand schedule. It is of two types Individual demand curve and Market demand curve.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong>Individual demand curve<\/strong>----when individual demand schedule is presented diagrammatically it is known as individual demand curve. In other words we can say it is a graphical presentation of demand schedule.<\/p>\r\n&nbsp;\r\n\r\n<img class=\"size-full wp-image-82 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-38.png\" alt=\"\" width=\"293\" height=\"252\" \/>\r\n<p style=\"text-align: justify\">sloping\u00a0\u00a0\u00a0 demand\u00a0\u00a0\u00a0 curve\u00a0\u00a0\u00a0 which\u00a0\u00a0\u00a0 shows consumer will buy more at lower prices and buy less when prices are high.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong>Market demand curve--- <\/strong>Market demand curve is a graphical presentation of market demand schedule. It is a lateral summation of the individual demand curve of each consumer.<\/p>\r\n&nbsp;\r\n\r\n<img class=\"size-full wp-image-83 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-39.png\" alt=\"\" width=\"500\" height=\"256\" \/>\r\n<p style=\"text-align: justify\">In these figures different quantities are shown at different price level demanded by individual customer X,Y,Z.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">And in market demand, curve is drawn by taking the lateral summation of individual demand curves.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong>Why demand curve slopes downward or Causes of downward slope of demand curve<\/strong><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">Law of demand shows inverse relationship between demand and price. It means people buy less at higher prices and buy more at lower prices. When this relationship presented with the help of graph the slope of curve that we got downward, it means it is left to right downward. Here are some reasons which are responsible for its downward sloping.<\/p>\r\n\r\n<ol style=\"text-align: justify\">\r\n \t<li><strong>Income effect---- <\/strong>when the price of the commodity falls the consumer can buy more quantities of the commodities with his given income .Because with fall in price his real income goes up. Real income is that income which is measured in term of goods and services. For example consumer has 50 rupees and he wants to buy 5 units of commodity \u201cA\u201d now suppose price of \u201cA\u201d commodity falls which leads to an increase in his real income by rupees 10 as now he is able to buy 5 units of \u201cA\u201d commodity for rupees 40 only. So it is observed that at high price real income will be less and at lower price real income will be more.<\/li>\r\n \t<li><strong>Substitution effect<\/strong>\u2014demand curve slope downward due to substitution effect also. A fall in the price of good, while the prices of its substitutes remain same, will make it attractive ti the buyer who will now demand more of it. On the other hand a rise in the price of good, when the prices of its substitutes remain same will make it unattractive to the consumer and they will buy lesser quantities of it. We can take here example of Tea and Coffee, when price of tea rise demand for coffee also rise and when price of tea fall demand of coffee also falls. It can be shown with the help of diagram too.<\/li>\r\n<\/ol>\r\n<img class=\"size-full wp-image-84 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-40.png\" alt=\"\" width=\"425\" height=\"318\" \/>\r\n<ol style=\"text-align: justify\" start=\"6\">\r\n \t<li style=\"text-align: justify\"><strong>Law of diminishing marginal utility<\/strong>\u2014law of diminishing marginal utility is also a reason for its downward slopping. The law of diminishing marginal utility states that as consumer goes on consuming more and more units of commodities, the utility derived from each successive unit goes on diminishing. It means consumer is in equilibrium when marginal utility of commodity is equal to its price. It means as the price of commodity falls, consumer purchases more of the commodity so that his marginal utility from the commodity falls to be equal to the reduced price and vice-versa.<\/li>\r\n \t<li><strong>New consumer<\/strong>\u2014A commodity tends to be put more use by costumers when its price falls. Many other consumers who were not consuming that commodity now will start to consume as a result total marker demand goes up.<\/li>\r\n \t<li><strong>Too many uses<\/strong>\u2014there are some commodities which have several uses. So when price of such commodities goes down people use it more for other purposes too. And when their price goes up they use it for important purposes only.<\/li>\r\n \t<li><strong>Psychological effect <\/strong>---- it\u2019s a natural phenomenon that people buy more at lower prices and buy less at higher prices. So with fall in prices demand increases and with rise in prices demand of commodities decreases.<\/li>\r\n<\/ol>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong>Exceptions to the law of demand<\/strong><\/p>\r\n<p style=\"text-align: justify\">As we know with the fall in prices people demanded more quantities and with the rise in prices they demanded less quantities, if other things being equal. But in certain cases people buy more even at higher prices, which are called exceptions to the law of demand. In such circumstances demand curve will slope upward or positive. So positive sloping demand curve shows the direct relationship between price and demand. It can be shown with the help of diagram.<\/p>\r\n&nbsp;\r\n\r\n<img class=\"size-full wp-image-85 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-41.png\" alt=\"\" width=\"451\" height=\"358\" \/>\r\n<p style=\"text-align: justify\">It shows a direct relation between price and demand, which means demand, goes up with the rise in prices and goes down when prices falls. So the factors which are responsible for positive slope of demand curve are given below.<\/p>\r\n\r\n<ol start=\"5\">\r\n \t<li style=\"text-align: justify\"><strong>Prestigious goods<\/strong>: Veblen effect---According to Veblen (American economist) some consumer measure the utility of commodity by its price, they consider greater the price of a commodity, the greater its utility. So in case of Veblen goods or Article of distinction people buy more at higher prices just to show off their status .for example, diamonds are considered prestige goods in the society and for upper strata of a society the higher the price of diamond higher the prestige value for them.<\/li>\r\n \t<li style=\"text-align: justify\"><strong>Giffen goods<\/strong>\u2014Sir Robert Giffen observed that in case of inferior goods with the fall in prices people buy less quantities of it, because they are ready to purchase some superior goods as with the fall in price their Real income increased. After the name of Sir Robert Giffen, such goods in whose case there is a direct relationship are called Giffen goods.<\/li>\r\n \t<li style=\"text-align: justify\"><strong>Expectations<\/strong>\u2014people will buy more even when there is increase in prices , if they expect that price may rise in near future. Similarly they will buy less even at lower prices if they expect that prices of commodities goes down in near future. So that is the reason of upward sloping of demand curve.<\/li>\r\n \t<li style=\"text-align: justify\"><strong>During war or emergency<\/strong>\u2014during the period of war, people may start buying for hoarding or building stocks even at higher prices. But in case of depression, they will less even at lower prices.<\/li>\r\n \t<li style=\"text-align: justify\"><strong>Ignorance<\/strong>\u2014some consumers think that more will be the price higher will be the quality. Or sometimes they purchases good at higher prices out of sheer ignorance.<\/li>\r\n<\/ol>\r\n&nbsp;\r\n\r\n<strong>Change in demand<\/strong>\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">Change in demand means change in demand due to its price as well as other factors such as income, fashion etc. When demand changes due to change in price such change is called Extension and Contraction of demand. It is also known as movement along a demand curve. If demand of goods increases due to fall in price, it is called Extension in demand, only price is a main determinant. And if demand decreases with a rise in prices, it is called Contraction in demand.<\/p>\r\n&nbsp;\r\n\r\n<img class=\"size-full wp-image-86 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-42.png\" alt=\"\" width=\"633\" height=\"353\" \/>\r\n\r\nIt can be shown with the help of schedule and diagram.\r\n<ol>\r\n \t<li>Extension and Contraction in Demand or Movement along demand curve. It happens when reason of change in demand is price only.<\/li>\r\n<\/ol>\r\n<p style=\"text-align: center\">Extension of demand<\/p>\r\n<img class=\"size-full wp-image-87 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-43.png\" alt=\"\" width=\"675\" height=\"210\" \/>\r\n<p style=\"text-align: justify\">This table shows that when prices of goods fall, demand extended.<\/p>\r\n&nbsp;\r\n\r\n<img class=\"size-full wp-image-88 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-44.png\" alt=\"\" width=\"449\" height=\"350\" \/>\r\n<p style=\"text-align: justify\">Contraction in demand\u2014when decreases with the rise in prices. It is called contraction in demand . It is shown by following table and diagram.<\/p>\r\n<p style=\"text-align: justify\">Contraction in Demand<\/p>\r\n<img class=\"size-full wp-image-89 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-45.png\" alt=\"\" width=\"748\" height=\"146\" \/>\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">This table shows that when prices rise, demand diminishes.<\/p>\r\n&nbsp;\r\n\r\n<img class=\"size-full wp-image-90 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-46.png\" alt=\"\" width=\"394\" height=\"262\" \/>\r\n<ol start=\"2\">\r\n \t<li style=\"text-align: justify\">Increase and decrease in demand curve or shift of demand curve.<\/li>\r\n<\/ol>\r\n<p style=\"text-align: justify\">When demand changes due to change in other factors instead of price like fashion, taste and preference. It is increase or decrease in demand.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">(1) Increase in demand<\/p>\r\n<p style=\"text-align: justify\">(a) same price , more demand<\/p>\r\n<p style=\"text-align: justify\">(b)More price, same demand<\/p>\r\n<p style=\"text-align: justify\">(a) Same price, more demand---When there is more demand even at same prices and same demand even at more prices. It can be shown with the help of following table and diagram.<\/p>\r\n&nbsp;\r\n\r\n<img class=\"size-full wp-image-91 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-47.png\" alt=\"\" width=\"690\" height=\"274\" \/>\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">It can be shown with the help of diagram.<\/p>\r\n<img class=\"size-full wp-image-92 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-48.png\" alt=\"\" width=\"377\" height=\"345\" \/>\r\n<p style=\"text-align: justify\">Decrease in demand\u2014Demand can be decrease in two ways<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">(a) Same price ,less demand<\/p>\r\n<p style=\"text-align: justify\">(b) Less price, same demand<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">(a) Same price, less demand\u2014when there is same price but demand goes on decreasing. it is called decrease in demand.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">It can be shown will the help of following table and diagram.<\/p>\r\n&nbsp;\r\n\r\n<img class=\"size-full wp-image-93 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-49.png\" alt=\"\" width=\"607\" height=\"241\" \/>\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">It can be shown by following diagram.<\/p>\r\n<img class=\"size-full wp-image-94 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-50.png\" alt=\"\" width=\"524\" height=\"378\" \/>\r\n<p style=\"text-align: justify\">On the basis of business point of view managerial economics have various types. These are:<\/p>\r\n&nbsp;\r\n\r\n<img class=\"size-full wp-image-95 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-51.png\" alt=\"\" width=\"641\" height=\"356\" \/>\r\n<ol>\r\n \t<li style=\"text-align: justify\"><strong>Direct and Derived Demand: <\/strong>Direct demand refers to demand for goods meant for final consumption; it is the demand for consumers\u2019 goods like food items, readymade garments etc. it is a demand which satisfy human wants directly. On the other hand, derived demand refers to demand for goods which are needed for further production, it is the demand for producers\u2019 goods like industrial raw materials, machine tools etc.<\/li>\r\n \t<li style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\">Joint and composite Demand<\/strong><span style=\"text-align: initial;font-size: 1em\">: Two or more goods are said to be jointly demanded when they must be consumed together to provided a given level of satisfaction. Some examples are cars and fuel, compact disc players and CD. On the other hand Composite demand refers to a good that has multiple purposes and satisfies different needs. The demand for power is composite as it is used for several purposes.<\/span><\/li>\r\n \t<li style=\"text-align: justify\"><strong>Competitive and Complementary Demand: <\/strong>Competitive demand is the demand for products that are competing for sales. People can substitute one competing product for another. If the demand for one product increases, the demand for its competitor will decrease. For example, Coke and Pepsi are competing soft drinks. If the price of Pepsi drops below that of Coke, consumer demand for Pepsi will increase while the demand for Coke decreases. Complementary demand, occurs when two products are necessary to meet one demand. A change in the demand for one of these goods causes a similar change in demand for the other product. For example, cars need gasoline or diesel fuel. An increase in the demand for automobiles leads to an increase in the demand for fuel. Both competitive and complementary demand collectively known as Cross Demand<\/li>\r\n \t<li style=\"text-align: justify\"><strong>Price, Income and Cross Demand: <\/strong>It indicates the relation between price and demand. It refers to the various quantities of the commodity which the consumer will buy at a particular time at a particular price. It shows inverse relationship between and demand or vice versa. On the other hand Income demand indicates the relation between income and demand of the consumer. Generally it shows the direct relationship between income and demand. Cross demand<\/li>\r\n \t<li style=\"text-align: justify\"><strong>New and Replacement Demands<\/strong>: If commodity is purchase for the purpose of an addition to stock, it is a new demand. And if commodity is purchase for maintaining the old stock of capital\/asset, it is replacement demand. Such replacement expenditure is to overcome depreciation in the existing stock.<\/li>\r\n \t<li><strong>Individual and Market Demands: <\/strong>individual demand refer to the quantity of product demanded by individual at a point of time or over a period of time given. On the other hand market demand for a commodity is the sum of all individual demands by all consumers.<\/li>\r\n \t<li style=\"text-align: justify\"><strong>Demand for consumer\u2019s and producer\u2019s goods<\/strong>\u2014consumer goods are needed for direct consumption. It is demanded for ultimate consumption like soft drinks, milk bread etc. On the other hand producers good are demanded for production of other goods such as tools machinery etc.<\/li>\r\n \t<li style=\"text-align: justify\"><strong>Demand for Perishable and Durable goods<\/strong>\u2014Demand for perishable goods is made at regular intervals. Perishable goods are those goods which cannot be used more than once or cannot stores over a long period. For example soap, sweets, fruits etc. Durable goods are those goods which have repeated uses. Durable goods meet both the current as well as future demand these goods could be stored for a long period. For example shoes, books, etc.<\/li>\r\n<\/ol>","rendered":"<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong>Learning Outcome<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">After completing this module the students will be able to understand:<\/p>\n<ul>\n<li style=\"text-align: justify\">The concept of Law of Demand<\/li>\n<li style=\"text-align: justify\">The Demand Curve<\/li>\n<li style=\"text-align: justify\">Demand function: identifying the relevant variables in a real-world business situation.<\/li>\n<li style=\"text-align: justify\">Various types of demand in view point managerial economics<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p>Downward sloping of demand curve and upward sloping of demand curve.<\/p>\n<p>&nbsp;<\/p>\n<p><strong style=\"text-align: initial;font-size: 1em\">Demand<\/strong><\/p>\n<div>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">The demand for a good is consumer\u2019s desire to have it for which he is willing and able to pay. So Desire for certain good or a service which is supported by the capacity to purchase is called demand. Generally people refer to the Want or the Desire for a thing as Demand but in economics they have different meaning. Desire is a wishful thinking. If a man willing to purchase a LED but he has no money to purchase it, then it is only a desire. If he has money with him but he is not ready to spend it, then it will remain his want. And if he has money and is willing to spend it, to buy a LED at a given price at a given period of time then it will become his demand.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">In simple words we can say that demand for a good is the amount of it that a consumer will purchase at a various prices during a period of time. Demand is a quantitative expression of preferences and in fact it is a photographic picture of consumer\u2019s attitude toward a commodity.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">According to Prof. Benham, \u201cThe demand for anything at a given price is the amount of it which will be bought per unit of time at that price \u201c.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">According to Hibdon, \u201cDemand means various quantities of a good that would be purchased per time period at different prices at a given market.\u201d<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Constituents of Demand:<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">1. Desire for good \/ service<\/p>\n<p style=\"text-align: justify\">2. Availability of resources\/Ability to pay<\/p>\n<p style=\"text-align: justify\">3. Willingness to pay<\/p>\n<p style=\"text-align: justify\">4. At a given price, and<\/p>\n<p style=\"text-align: justify\">5. At a given period of time<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Demand function\/Factors affecting demand<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">Demand function for the commodity explains the relationship between the quantity demanded and factors that influence it. There are many factors which influence the demand for a commodity. Some of these factors are given below:<\/p>\n<\/div>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-72 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-29.png\" alt=\"\" width=\"422\" height=\"394\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-29.png 422w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-29-300x280.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-29-65x61.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-29-225x210.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-29-350x327.png 350w\" sizes=\"auto, (max-width: 422px) 100vw, 422px\" \/><\/p>\n<ol>\n<li style=\"text-align: justify\"><strong>Price of related good\/service\u2014<\/strong>when change in the price of one good changes the demand of another good then we can say that two goods are related with each other. It is of two types (a) substitute and (b) complementary goods. When price of one good increases the demand of another good it is called substitute goods and when increase in price of one good decreases the demand of another good it is called complementary goods. So substitute goods are positively related and complementary goods are negatively related.<\/li>\n<\/ol>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-73 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-30.png\" alt=\"\" width=\"697\" height=\"283\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-30.png 697w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-30-300x122.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-30-65x26.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-30-225x91.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-30-350x142.png 350w\" sizes=\"auto, (max-width: 697px) 100vw, 697px\" \/><\/p>\n<ol start=\"3\">\n<li style=\"text-align: justify\"><strong>Income of the consumer<\/strong>&#8212;- income of the consumer is an important determinant of demand. More the income of the people more will be the demand. When income of the people increases, they can afford to buy more. So income has a positive effect on demand. People will buy more with increase in income and buy less when income decreases. So income spending on different goods can be classified as under<\/li>\n<\/ol>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">(a) For Necessities of life: In case of Necessities of life there is no change in demand with the changing level of income level of consumer. We can take an example of salt here. Amount of salt used by the consumer has nothing to do with the change of income. Amount of salt used by the consumer is same irrespective of income. It can be shown with the help of diagram<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-74 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-31.png\" alt=\"\" width=\"389\" height=\"279\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-31.png 389w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-31-300x215.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-31-65x47.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-31-225x161.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-31-350x251.png 350w\" sizes=\"auto, (max-width: 389px) 100vw, 389px\" \/><\/p>\n<p style=\"text-align: justify\">(b) For Comforts&#8212;comfort goods are those goods which make our lives comfortable. After satisfying necessities of life, people spent money on comforts. Comfort goods are used to maintain or increase efficiency. For example use of AC in summers and heater in winter make life comfortable .In comfort we can include two types of goods ie Normal goods and Inferior goods. For normal good demand always increase with the increase in income so there is always positive relationship between income and quantity demanded. In case of inferior goods demand decreases with the increase of income. So there is inverse relationship it can also be shown with the help of diagram.<\/p>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-75 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-32.png\" alt=\"\" width=\"566\" height=\"340\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-32.png 566w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-32-300x180.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-32-65x39.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-32-225x135.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-32-350x210.png 350w\" sizes=\"auto, (max-width: 566px) 100vw, 566px\" \/><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-76 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-33.png\" alt=\"\" width=\"498\" height=\"276\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-33.png 498w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-33-300x166.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-33-65x36.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-33-225x125.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-33-350x194.png 350w\" sizes=\"auto, (max-width: 498px) 100vw, 498px\" \/><\/p>\n<p style=\"text-align: justify\">(C) For Luxuries\u2014After satisfying comforts people go for luxuries of life. It is directely related with the income. People will buy more with the increase in income.it can be shown with the help of diagram also.<\/p>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-78 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-34.png\" alt=\"\" width=\"465\" height=\"362\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-34.png 465w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-34-300x234.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-34-65x51.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-34-225x175.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-34-350x272.png 350w\" sizes=\"auto, (max-width: 465px) 100vw, 465px\" \/><\/p>\n<ol start=\"9\">\n<li style=\"text-align: justify\"><strong>Price of good\/ service&#8212;<\/strong>Demand is also influenced by its price. People will buy more at lower prices and but less when prices increase. A fall in price of goods leads to rise in consumers purchasing power<\/li>\n<li style=\"text-align: justify\"><strong>Quality of the good \/service<\/strong>\u2014Quality of the product also influences demand. Better quality of the product creates more demand.<\/li>\n<li style=\"text-align: justify\"><strong>Taste and preferences of the consumer<\/strong><strong>&#8212;<\/strong> Taste, preferences and fashion also influences demand to a great extent .Demand of a product goes up if consumers have taste and preference for it, and demand goes down if consumers have no taste of the commodity.<\/li>\n<li style=\"text-align: justify\"><strong>Advertising&#8212;- <\/strong>Amount spent on advertisement of product will also influence demand. Advertisement of product increases their sales.<\/li>\n<li style=\"text-align: justify\"><strong>Weather<\/strong>&#8212;weather condition of region also effect demand for a particular product. Demand for umbrellas goes up in a rainy season. On the other hand demand for woollens goes up in winter season.<\/li>\n<li style=\"text-align: justify\"><strong>Expectations<\/strong>\u2014consumer\u2019s expectations also play a very important role in deciding demand. If consumer expect that prices of the product may rise in future then demand will goes up. On the other hand expectations of fall in prices, will diminish the demand. Similarly if a consumer expect higher income in future, he spend more at present and if he expect lower income in future his demand will goes down.<\/li>\n<li style=\"text-align: justify\"><strong>Size\/Growth of population&#8211;<\/strong>&#8211; Demand of the product depends upon the size\/ growth of population also. Larger the size of the population greater will be the demand and vice versa.<\/li>\n<li style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\">Distribution of income and wealth&#8211;<\/strong><span style=\"text-align: initial;font-size: 1em\">&#8211;Level of national income and wealth is also very important factor of determining demand. Higher the income more will be the demand and, lower the income lesser will be the demand.<\/span><\/li>\n<\/ol>\n<p><strong>LAW OF DEMAND<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">Law of demand describes the general tendency of consumer\u2019s behaviour. It explains the functional relationship between two variables that is price and quantity demanded. Law of demand explains the inverse relationship between price and demand. It means people will buy more at lower prices and buy less when price rises. In other words we can say that when price of the commodity falls, demand for the commodity increases and when price rises, the demand for the commodity decreases.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong>According to Samuelson<\/strong>: \u201c Law of demand states that people will buy more at lower prices and buy less at higher prices, if other things remains the same( ceteris paribus).\u201d<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong>According to Ferguson<\/strong>: \u201cThe quantity demanded varies inversely with price.\u201d<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">So according to law of demand if other things being equal, when price of a commodity falls, quantity demanded of it will rise, and if the price of commodity rise its quantity demanding will decline. These other things which are assumed to be constant are the taste and preferences of consumer, income of consumer, prices of related good, size of population and future expectations of rise or fall in prices.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-79 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-35.png\" alt=\"\" width=\"531\" height=\"440\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-35.png 531w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-35-300x249.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-35-65x54.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-35-225x186.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-35-350x290.png 350w\" sizes=\"auto, (max-width: 531px) 100vw, 531px\" \/><\/p>\n<p style=\"text-align: justify\">ASSUMPTIONS OF THE LAW.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">According to Stigler and Boulding, the law of demand based on the following assumptions:<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">1. There should be no change in the income of consumers.<\/p>\n<p style=\"text-align: justify\">2. There should be no change in the taste and preferences of the consumer.<\/p>\n<p style=\"text-align: justify\">3. There should be no change in the prices of related goods.<\/p>\n<p style=\"text-align: justify\">4. There should be no change in the size of population.<\/p>\n<p style=\"text-align: justify\">5. Consumer is a rational consumer.<\/p>\n<p style=\"text-align: justify\">6. There should be no expectation of rise or fall in price of related goods in future.<\/p>\n<p style=\"text-align: justify\">7. There should be perfect competition in the market.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">Law of demand can be explained with the help of demand schedule and demand curve.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">Demand Schedule&#8212;-It shows the relationship between price and quantities demanded at different prices.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">Demand schedule can be classified into two categories:<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">1. Individual demand schedule: it shows quantities of commodities demanded by the individual consumer at different prices. It can be shown with the help of following table.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">INDIVIDUAL DEMAND SCHEDULE of person X<\/p>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-80 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-36.png\" alt=\"\" width=\"680\" height=\"121\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-36.png 680w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-36-300x53.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-36-65x12.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-36-225x40.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-36-350x62.png 350w\" sizes=\"auto, (max-width: 680px) 100vw, 680px\" \/><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">From the above table it is seen that consumer X buy more units of commodity A when its prices goes down, and buy less when prices high.<\/p>\n<ol start=\"2\">\n<li style=\"text-align: justify\"><strong>Market demand schedule<\/strong>&#8212; It shows quantities of commodities demanded by all the consumers in a market. In other words we can say that Market demand schedule is defined as the quantities of a given commodity which all consumers will buy at all possible prices at a given point of time. It can be shown with the help of following table.<\/li>\n<\/ol>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-81 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-37.png\" alt=\"\" width=\"683\" height=\"172\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-37.png 683w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-37-300x76.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-37-65x16.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-37-225x57.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-37-350x88.png 350w\" sizes=\"auto, (max-width: 683px) 100vw, 683px\" \/><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">It is shown in a table that when price is 50 per unit then consumer X\u2019s demand is 10 units, consumer Y\u2019s demand is 15 units and consumer Z\u2019s demand is 5 units of commodity A. So market demand is 30. Similarly at price 40,30,20,and10 per unit total demand by all three is 55,80,105 and 130.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong>Demand curve\u2014<\/strong>demand curve is a graphical presentation of demand schedule. It is of two types Individual demand curve and Market demand curve.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong>Individual demand curve<\/strong>&#8212;-when individual demand schedule is presented diagrammatically it is known as individual demand curve. In other words we can say it is a graphical presentation of demand schedule.<\/p>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-82 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-38.png\" alt=\"\" width=\"293\" height=\"252\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-38.png 293w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-38-65x56.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-38-225x194.png 225w\" sizes=\"auto, (max-width: 293px) 100vw, 293px\" \/><\/p>\n<p style=\"text-align: justify\">sloping\u00a0\u00a0\u00a0 demand\u00a0\u00a0\u00a0 curve\u00a0\u00a0\u00a0 which\u00a0\u00a0\u00a0 shows consumer will buy more at lower prices and buy less when prices are high.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong>Market demand curve&#8212; <\/strong>Market demand curve is a graphical presentation of market demand schedule. It is a lateral summation of the individual demand curve of each consumer.<\/p>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-83 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-39.png\" alt=\"\" width=\"500\" height=\"256\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-39.png 500w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-39-300x154.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-39-65x33.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-39-225x115.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-39-350x179.png 350w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/p>\n<p style=\"text-align: justify\">In these figures different quantities are shown at different price level demanded by individual customer X,Y,Z.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">And in market demand, curve is drawn by taking the lateral summation of individual demand curves.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong>Why demand curve slopes downward or Causes of downward slope of demand curve<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">Law of demand shows inverse relationship between demand and price. It means people buy less at higher prices and buy more at lower prices. When this relationship presented with the help of graph the slope of curve that we got downward, it means it is left to right downward. Here are some reasons which are responsible for its downward sloping.<\/p>\n<ol style=\"text-align: justify\">\n<li><strong>Income effect&#8212;- <\/strong>when the price of the commodity falls the consumer can buy more quantities of the commodities with his given income .Because with fall in price his real income goes up. Real income is that income which is measured in term of goods and services. For example consumer has 50 rupees and he wants to buy 5 units of commodity \u201cA\u201d now suppose price of \u201cA\u201d commodity falls which leads to an increase in his real income by rupees 10 as now he is able to buy 5 units of \u201cA\u201d commodity for rupees 40 only. So it is observed that at high price real income will be less and at lower price real income will be more.<\/li>\n<li><strong>Substitution effect<\/strong>\u2014demand curve slope downward due to substitution effect also. A fall in the price of good, while the prices of its substitutes remain same, will make it attractive ti the buyer who will now demand more of it. On the other hand a rise in the price of good, when the prices of its substitutes remain same will make it unattractive to the consumer and they will buy lesser quantities of it. We can take here example of Tea and Coffee, when price of tea rise demand for coffee also rise and when price of tea fall demand of coffee also falls. It can be shown with the help of diagram too.<\/li>\n<\/ol>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-84 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-40.png\" alt=\"\" width=\"425\" height=\"318\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-40.png 425w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-40-300x224.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-40-65x49.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-40-225x168.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-40-350x262.png 350w\" sizes=\"auto, (max-width: 425px) 100vw, 425px\" \/><\/p>\n<ol style=\"text-align: justify\" start=\"6\">\n<li style=\"text-align: justify\"><strong>Law of diminishing marginal utility<\/strong>\u2014law of diminishing marginal utility is also a reason for its downward slopping. The law of diminishing marginal utility states that as consumer goes on consuming more and more units of commodities, the utility derived from each successive unit goes on diminishing. It means consumer is in equilibrium when marginal utility of commodity is equal to its price. It means as the price of commodity falls, consumer purchases more of the commodity so that his marginal utility from the commodity falls to be equal to the reduced price and vice-versa.<\/li>\n<li><strong>New consumer<\/strong>\u2014A commodity tends to be put more use by costumers when its price falls. Many other consumers who were not consuming that commodity now will start to consume as a result total marker demand goes up.<\/li>\n<li><strong>Too many uses<\/strong>\u2014there are some commodities which have several uses. So when price of such commodities goes down people use it more for other purposes too. And when their price goes up they use it for important purposes only.<\/li>\n<li><strong>Psychological effect <\/strong>&#8212;- it\u2019s a natural phenomenon that people buy more at lower prices and buy less at higher prices. So with fall in prices demand increases and with rise in prices demand of commodities decreases.<\/li>\n<\/ol>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong>Exceptions to the law of demand<\/strong><\/p>\n<p style=\"text-align: justify\">As we know with the fall in prices people demanded more quantities and with the rise in prices they demanded less quantities, if other things being equal. But in certain cases people buy more even at higher prices, which are called exceptions to the law of demand. In such circumstances demand curve will slope upward or positive. So positive sloping demand curve shows the direct relationship between price and demand. It can be shown with the help of diagram.<\/p>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-85 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-41.png\" alt=\"\" width=\"451\" height=\"358\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-41.png 451w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-41-300x238.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-41-65x52.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-41-225x179.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-41-350x278.png 350w\" sizes=\"auto, (max-width: 451px) 100vw, 451px\" \/><\/p>\n<p style=\"text-align: justify\">It shows a direct relation between price and demand, which means demand, goes up with the rise in prices and goes down when prices falls. So the factors which are responsible for positive slope of demand curve are given below.<\/p>\n<ol start=\"5\">\n<li style=\"text-align: justify\"><strong>Prestigious goods<\/strong>: Veblen effect&#8212;According to Veblen (American economist) some consumer measure the utility of commodity by its price, they consider greater the price of a commodity, the greater its utility. So in case of Veblen goods or Article of distinction people buy more at higher prices just to show off their status .for example, diamonds are considered prestige goods in the society and for upper strata of a society the higher the price of diamond higher the prestige value for them.<\/li>\n<li style=\"text-align: justify\"><strong>Giffen goods<\/strong>\u2014Sir Robert Giffen observed that in case of inferior goods with the fall in prices people buy less quantities of it, because they are ready to purchase some superior goods as with the fall in price their Real income increased. After the name of Sir Robert Giffen, such goods in whose case there is a direct relationship are called Giffen goods.<\/li>\n<li style=\"text-align: justify\"><strong>Expectations<\/strong>\u2014people will buy more even when there is increase in prices , if they expect that price may rise in near future. Similarly they will buy less even at lower prices if they expect that prices of commodities goes down in near future. So that is the reason of upward sloping of demand curve.<\/li>\n<li style=\"text-align: justify\"><strong>During war or emergency<\/strong>\u2014during the period of war, people may start buying for hoarding or building stocks even at higher prices. But in case of depression, they will less even at lower prices.<\/li>\n<li style=\"text-align: justify\"><strong>Ignorance<\/strong>\u2014some consumers think that more will be the price higher will be the quality. Or sometimes they purchases good at higher prices out of sheer ignorance.<\/li>\n<\/ol>\n<p>&nbsp;<\/p>\n<p><strong>Change in demand<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">Change in demand means change in demand due to its price as well as other factors such as income, fashion etc. When demand changes due to change in price such change is called Extension and Contraction of demand. It is also known as movement along a demand curve. If demand of goods increases due to fall in price, it is called Extension in demand, only price is a main determinant. And if demand decreases with a rise in prices, it is called Contraction in demand.<\/p>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-86 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-42.png\" alt=\"\" width=\"633\" height=\"353\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-42.png 633w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-42-300x167.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-42-65x36.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-42-225x125.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-42-350x195.png 350w\" sizes=\"auto, (max-width: 633px) 100vw, 633px\" \/><\/p>\n<p>It can be shown with the help of schedule and diagram.<\/p>\n<ol>\n<li>Extension and Contraction in Demand or Movement along demand curve. It happens when reason of change in demand is price only.<\/li>\n<\/ol>\n<p style=\"text-align: center\">Extension of demand<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-87 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-43.png\" alt=\"\" width=\"675\" height=\"210\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-43.png 675w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-43-300x93.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-43-65x20.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-43-225x70.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-43-350x109.png 350w\" sizes=\"auto, (max-width: 675px) 100vw, 675px\" \/><\/p>\n<p style=\"text-align: justify\">This table shows that when prices of goods fall, demand extended.<\/p>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-88 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-44.png\" alt=\"\" width=\"449\" height=\"350\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-44.png 449w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-44-300x234.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-44-65x51.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-44-225x175.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-44-350x273.png 350w\" sizes=\"auto, (max-width: 449px) 100vw, 449px\" \/><\/p>\n<p style=\"text-align: justify\">Contraction in demand\u2014when decreases with the rise in prices. It is called contraction in demand . It is shown by following table and diagram.<\/p>\n<p style=\"text-align: justify\">Contraction in Demand<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-89 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-45.png\" alt=\"\" width=\"748\" height=\"146\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-45.png 748w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-45-300x59.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-45-65x13.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-45-225x44.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-45-350x68.png 350w\" sizes=\"auto, (max-width: 748px) 100vw, 748px\" \/><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">This table shows that when prices rise, demand diminishes.<\/p>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-90 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-46.png\" alt=\"\" width=\"394\" height=\"262\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-46.png 394w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-46-300x199.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-46-65x43.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-46-225x150.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-46-350x233.png 350w\" sizes=\"auto, (max-width: 394px) 100vw, 394px\" \/><\/p>\n<ol start=\"2\">\n<li style=\"text-align: justify\">Increase and decrease in demand curve or shift of demand curve.<\/li>\n<\/ol>\n<p style=\"text-align: justify\">When demand changes due to change in other factors instead of price like fashion, taste and preference. It is increase or decrease in demand.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">(1) Increase in demand<\/p>\n<p style=\"text-align: justify\">(a) same price , more demand<\/p>\n<p style=\"text-align: justify\">(b)More price, same demand<\/p>\n<p style=\"text-align: justify\">(a) Same price, more demand&#8212;When there is more demand even at same prices and same demand even at more prices. It can be shown with the help of following table and diagram.<\/p>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-91 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-47.png\" alt=\"\" width=\"690\" height=\"274\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-47.png 690w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-47-300x119.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-47-65x26.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-47-225x89.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-47-350x139.png 350w\" sizes=\"auto, (max-width: 690px) 100vw, 690px\" \/><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">It can be shown with the help of diagram.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-92 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-48.png\" alt=\"\" width=\"377\" height=\"345\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-48.png 377w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-48-300x275.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-48-65x59.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-48-225x206.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-48-350x320.png 350w\" sizes=\"auto, (max-width: 377px) 100vw, 377px\" \/><\/p>\n<p style=\"text-align: justify\">Decrease in demand\u2014Demand can be decrease in two ways<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">(a) Same price ,less demand<\/p>\n<p style=\"text-align: justify\">(b) Less price, same demand<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">(a) Same price, less demand\u2014when there is same price but demand goes on decreasing. it is called decrease in demand.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">It can be shown will the help of following table and diagram.<\/p>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-93 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-49.png\" alt=\"\" width=\"607\" height=\"241\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-49.png 607w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-49-300x119.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-49-65x26.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-49-225x89.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-49-350x139.png 350w\" sizes=\"auto, (max-width: 607px) 100vw, 607px\" \/><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">It can be shown by following diagram.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-94 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-50.png\" alt=\"\" width=\"524\" height=\"378\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-50.png 524w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-50-300x216.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-50-65x47.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-50-225x162.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-50-350x252.png 350w\" sizes=\"auto, (max-width: 524px) 100vw, 524px\" \/><\/p>\n<p style=\"text-align: justify\">On the basis of business point of view managerial economics have various types. These are:<\/p>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-95 aligncenter\" src=\"http:\/\/mgmtp11.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-51.png\" alt=\"\" width=\"641\" height=\"356\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-51.png 641w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-51-300x167.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-51-65x36.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-51-225x125.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-content\/uploads\/sites\/77\/2018\/10\/Untitled-51-350x194.png 350w\" sizes=\"auto, (max-width: 641px) 100vw, 641px\" \/><\/p>\n<ol>\n<li style=\"text-align: justify\"><strong>Direct and Derived Demand: <\/strong>Direct demand refers to demand for goods meant for final consumption; it is the demand for consumers\u2019 goods like food items, readymade garments etc. it is a demand which satisfy human wants directly. On the other hand, derived demand refers to demand for goods which are needed for further production, it is the demand for producers\u2019 goods like industrial raw materials, machine tools etc.<\/li>\n<li style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\">Joint and composite Demand<\/strong><span style=\"text-align: initial;font-size: 1em\">: Two or more goods are said to be jointly demanded when they must be consumed together to provided a given level of satisfaction. Some examples are cars and fuel, compact disc players and CD. On the other hand Composite demand refers to a good that has multiple purposes and satisfies different needs. The demand for power is composite as it is used for several purposes.<\/span><\/li>\n<li style=\"text-align: justify\"><strong>Competitive and Complementary Demand: <\/strong>Competitive demand is the demand for products that are competing for sales. People can substitute one competing product for another. If the demand for one product increases, the demand for its competitor will decrease. For example, Coke and Pepsi are competing soft drinks. If the price of Pepsi drops below that of Coke, consumer demand for Pepsi will increase while the demand for Coke decreases. Complementary demand, occurs when two products are necessary to meet one demand. A change in the demand for one of these goods causes a similar change in demand for the other product. For example, cars need gasoline or diesel fuel. An increase in the demand for automobiles leads to an increase in the demand for fuel. Both competitive and complementary demand collectively known as Cross Demand<\/li>\n<li style=\"text-align: justify\"><strong>Price, Income and Cross Demand: <\/strong>It indicates the relation between price and demand. It refers to the various quantities of the commodity which the consumer will buy at a particular time at a particular price. It shows inverse relationship between and demand or vice versa. On the other hand Income demand indicates the relation between income and demand of the consumer. Generally it shows the direct relationship between income and demand. Cross demand<\/li>\n<li style=\"text-align: justify\"><strong>New and Replacement Demands<\/strong>: If commodity is purchase for the purpose of an addition to stock, it is a new demand. And if commodity is purchase for maintaining the old stock of capital\/asset, it is replacement demand. Such replacement expenditure is to overcome depreciation in the existing stock.<\/li>\n<li><strong>Individual and Market Demands: <\/strong>individual demand refer to the quantity of product demanded by individual at a point of time or over a period of time given. On the other hand market demand for a commodity is the sum of all individual demands by all consumers.<\/li>\n<li style=\"text-align: justify\"><strong>Demand for consumer\u2019s and producer\u2019s goods<\/strong>\u2014consumer goods are needed for direct consumption. It is demanded for ultimate consumption like soft drinks, milk bread etc. On the other hand producers good are demanded for production of other goods such as tools machinery etc.<\/li>\n<li style=\"text-align: justify\"><strong>Demand for Perishable and Durable goods<\/strong>\u2014Demand for perishable goods is made at regular intervals. Perishable goods are those goods which cannot be used more than once or cannot stores over a long period. For example soap, sweets, fruits etc. Durable goods are those goods which have repeated uses. Durable goods meet both the current as well as future demand these goods could be stored for a long period. For example shoes, books, etc.<\/li>\n<\/ol>\n","protected":false},"author":3,"menu_order":4,"template":"","meta":{"_acf_changed":false,"pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":["dr-savita"],"pb_section_license":""},"chapter-type":[],"contributor":[59],"license":[],"class_list":["post-68","chapter","type-chapter","status-publish","hentry","contributor-dr-savita"],"part":3,"_links":{"self":[{"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-json\/pressbooks\/v2\/chapters\/68","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-json\/wp\/v2\/users\/3"}],"version-history":[{"count":5,"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-json\/pressbooks\/v2\/chapters\/68\/revisions"}],"predecessor-version":[{"id":98,"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-json\/pressbooks\/v2\/chapters\/68\/revisions\/98"}],"part":[{"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-json\/pressbooks\/v2\/parts\/3"}],"metadata":[{"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-json\/pressbooks\/v2\/chapters\/68\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-json\/wp\/v2\/media?parent=68"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-json\/pressbooks\/v2\/chapter-type?post=68"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-json\/wp\/v2\/contributor?post=68"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp11\/wp-json\/wp\/v2\/license?post=68"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}