• To understand the concept of demand
• To formulate a demand schedule using the
given demand function
• To flat a demand curve based on the
demand schedule
• To explain how the determinants of
demand affects consumers’ demand
• Refers to the various quantities of a good that a consumer is wiling and able to buy
• Demand for a particular commodity implies:
- Desire of the customer to buy the product;
- The customers willingness to buy the product;
- Sufficient purchasing power in the customers possession to buy the product.
Law of Demand
• Law of demand expresses the relationship
between the Quantity demanded and the Price
of the commodity.
• The law of demands states that,
“Ceteris Paribus, (other things remaining
constant) the lower the price of a commodity the
larger the quantity demanded of it and vice
versa.”
Demand function
• Represents consumer demand in
mathematical form.
• It specifies the relationship between the
price of good and the various quantities
that a consumer is willing and able to buy
Demand function
Demand Schedule
A demand schedule Price Quantity
is a numerical
tabulation that
20 0
shows the quantity 16 1
of demand 12 5
commodity at
different prices. 8 15
4 28
Demand Curve
The demand curve is a
graphical
representation of the
relationship between
the price of a good or
service and the
quantity demanded for
a given period of time
Let’s try!
Demand Schedule for
Cookies
Point Price Qd
A 0
B 16
C 2
D 3
E 4
F 8
SEATWORK
Demand Schedule for
• Given the demand Cookies
function Qd= 50- 2P, Point Price Qd
complete the A 25
demand schedule for B 2
cookies
C 6
• Flat the demand
D 18
schedule in a
E 15
demand curve
F 26
G 10
Determinants of Demand
1. Income
income effect represents the change in an individual's or
economy's income and shows how that change impacts
the quantity demand of a good or service
Determinants of Demand
2. Price of other goods
•Complementary goods
•Substitute goods
3. Consumer expectation/ Expectation of future
prices
4. Taste and preferences
5. Advertising
Types of Goods
• Complementary goods are a pair of goods
consumed together. As the price of one
goes up the demand for the other falls.
Example- car and petrol
• Substitute goods are alternatives to each
other. As the price of one goes up the
demand for the other also goes up.
Example – pepsi and coke
Types of Goods
• Normal goods are those goods whose demand
goes up when the consumer’s income increases.
• Inferior goods are those goods whose demand
falls when the consumer’s income increases.
• Snob or Veblen goods are those goods whose
demand falls when price falls
Demand Elasticity
Objectives:
•To understand the meaning of
responsiveness of demand to changes in
determinants of demand.
•To discuss various types of elasticities of
demand
•To understand the relevance and
application of elasticities of demand
Demand Elasticity
• Demand elasticity refers to how sensitive the
demand for a good is to changes in other
economic variables, such as the prices and
consumer income.
• A higher demand elasticity for a particular
economic variable means that consumers are
more responsive to changes in this variable,
such as price or income.
Demand Elasticity
Types of Demand Elasticity
Elastic
•The percentage
change in price
results in a greater
percentage change
in quantity demand.
Ex: luxury goods
•Value: >1
Types of Demand Elasticity
Inelastic
•Demand is less responsive
to change in price in price.
Ex: bread
•Value: <1
Types of Demand Elasticity
Unitary
•Equal response of demand
to price change.
Ex: semi-luxury or semi-
essential goods
•Value: 1
Types of Demand Elasticity
Perfectly elastic
•The price elasticity of
demand is infinite.
Slight change in price
can result in an infinitely
large change in quantity
demand.
•Value: ∞
Types of Demand Elasticity
Perfectly inelastic
•Demand doesn’t changes
when price changes.
Consumers buy the same
quantity despite the
alteration in price. ex: drugs
•Value: 0
