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DEMANDDEMAND
Willingness of the buyerWillingness of the buyer
Ability of the buyerAbility of the buyer
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DEMANDDEMAND
The Qty demandedThe Qty demanded
The price at which the quantity isThe price at which the quantity is
demandeddemanded The time periodThe time period
The market areaThe market area
Annual demand for TV in Delhi at anAnnual demand for TV in Delhi at anaverage price of Rs 15000 each is 50,000average price of Rs 15000 each is 50,000is a meaningful demandis a meaningful demand
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TYPES OF DEMANDTYPES OF DEMAND
Individual DemandIndividual Demand
Market DemandMarket Demand
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Demand for durable goodsDemand for durable goods
Demand for NonDemand for Non--Durable goodsDurable goods
Durable Goods : Are those goods whoseDurable Goods : Are those goods whosetotal utility or usefulness is nottotal utility or usefulness is not exhuastedexhuastedin a single or short run use .They are usedin a single or short run use .They are usedrepeatedly .repeatedly .
ExEx Clothes,shoes,carsClothes,shoes,cars ,,building,plantbuilding,plant,machinery etc,machinery etc
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NonNon--Durable goodsDurable goods Which can be usedWhich can be usedor consumed only once and their utility isor consumed only once and their utility is
exhausted in a single use .Exexhausted in a single use .Ex FoodFooditems,rawitems,raw material,fuel,powermaterial,fuel,power ,packing,packingitems etcitems etc
Demand for nonDemand for non--durable goods dependsdurable goods depends
upon the current price ,consumer incomeupon the current price ,consumer incomeanfdanfd fashion and is subject to frequentfashion and is subject to frequentchanges.Itschanges.Its demand changes linearly .demand changes linearly .
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Demand for durable goods depends onDemand for durable goods depends onthe expected price , income and change inthe expected price , income and change in
technology.I
tstechnology.I
ts demand vary over ademand vary over arelatively longer period of time . Itrelatively longer period of time . It creatscreatsreplacement demand .Its demandreplacement demand .Its demandincreases or decreasesincreases or decreases exponetiallyexponetially ..
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CONSUMER GOODSCONSUMER GOODS
Consumer goods are products that areConsumer goods are products that areproduced for consumption and use byproduced for consumption and use by
human.T
hey are final goods specificallyhuman.T
hey are final goods specificallyintended for the mass market .intended for the mass market .
Producer Goods are goods that are usedProducer Goods are goods that are usedas inputs in the production of other goods.as inputs in the production of other goods.
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SHORTTERM/LONG TERMSHORTTERM/LONG TERM
GOODSGOODS
Goods that are demanded for a shortGoods that are demanded for a shortperiodperiod FashionFashion
Goods that are demanded over alongGoods that are demanded over alongperiodperiod -- HousingHousing
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NORMAL GOODNORMAL GOOD
AnyAny goodsgoods for whichfor which demanddemand increasesincreaseswhen income increases and falls whenwhen income increases and falls when
income decreases but price remainsincome decreases but price remainsconstant.constant.
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INFERIOR GOODINFERIOR GOOD
AnyAny goodsgoods for whichfor which demanddemand decreasesdecreaseswhen income increases and increaseswhen income increases and increaseswhen income decreases but price remainswhen income decreases but price remainsconstant.constant.
ExEx-- Inter city bus servicesInter city bus services
--Demand for potatoDemand for potato
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SUPPLYSUPPLY
Willingness of the supplierWillingness of the supplier
Ability of the supplierAbility of the supplier
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EXPERIENCE/CREDENCEEXPERIENCE/CREDENCE
GOODSGOODS
Experience goodExperience good is a product or service whereis a product or service whereproduct characteristics such as quality or priceproduct characteristics such as quality or priceare difficult to observe in advance, but theseare difficult to observe in advance, but these
characteristics can be ascertained uponcharacteristics can be ascertained uponconsumptionconsumption
HealthcareHealthcare
Credence Goods are goods for which it is difficultCredence Goods are goods for which it is difficult
for consumers to ascertain the quality evenfor consumers to ascertain the quality even afterafterthey have consumed them.they have consumed them.
VitaminVitamin
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GIFFEN GOODSGIFFEN GOODS
aa GiffenGiffen goodgood is one which peopleis one which peopleconsume more of as price rises, violatingconsume more of as price rises, violatingthethe law of demandlaw of demand..
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GIFFEN GOODSGIFFEN GOODS
1.1. the good in question must be anthe good in question must be an inferior goodinferior good,,
2.2. there must be a lack of closethere must be a lack of close substitute goodssubstitute goods,,andand
3.3. the good must constitute a substantialthe good must constitute a substantialpercentage of the buyer's income, but notpercentage of the buyer's income, but notsuch a substantial percentage of the buyer'ssuch a substantial percentage of the buyer'sincome that none of the associatedincome that none of the associated normalnormal
goodsgoods are consumed.are consumed.All Giffen goods are inferior goods but not allAll Giffen goods are inferior goods but not all
inferior goods are Giffen goods.inferior goods are Giffen goods.
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BAJRA WHEAT
Rs 10 Per Kg 20 Per Kg
20Kg 10Kg
Rs 200 200
BAJRA WHEAT
Rs 12 Per Kg 20 Per Kg
25Kg 5Kg
Rs 300 100
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Complementary GoodsComplementary Goods
AA complementary goodcomplementary good oror complementcomplementgoodgood inin economicseconomics is ais a goodgood which iswhich isconsumed with another good; It is twoconsumed with another good; It is twogoods that are bought and used togethergoods that are bought and used together
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SUBSTITUTE GOODSSUBSTITUTE GOODS
When the two kinds of goods can beWhen the two kinds of goods can beconsumed or used in place of one anotherconsumed or used in place of one anotherin at least some of their possible uses,in at least some of their possible uses,they are known as substitute goods.they are known as substitute goods.
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LAW OF DEMANDLAW OF DEMAND
AllAll otherother factorsfactors beingbeing equal,equal, asas thethe
priceprice ofof aa goodgood oror serviceservice increases,increases,
consumerconsumer demanddemand forfor thethe goodgood oror
serviceservice willwill decreasedecrease andand vicevice
versaversa..ThereThere isis aa inverseinverse relationshiprelationship
betweenbetween priceprice andand quantityquantity demandeddemanded..
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Marketdemand curveMarketdemand curve
Shows the maximum amount of aShows the maximum amount of acommodity that buyers would like tocommodity that buyers would like topurchase at various pricespurchase at various prices
The following figure shows the shape of aThe following figure shows the shape of a
demand curve.demand curve.
Demand curve
Price
0
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Propertiesofthe DemandCurvePropertiesofthe DemandCurve
The demand curve can refer to an individual, firm, or toThe demand curve can refer to an individual, firm, or toa whole market.a whole market.
The demand curve refers to a particular period of time.The demand curve refers to a particular period of time.
It is downward sloping implying that a lower priceIt is downward sloping implying that a lower priceresults in more quantity demanded.results in more quantity demanded.
Any demand curve is drawn based on the assumptionAny demand curve is drawn based on the assumptionthat the following variables (or parameters) arethat the following variables (or parameters) areconstant:constant:
Prices of competing goodsPrices of competing goods
Incomes of consumersIncomes of consumers
Number of consumers in the marketNumber of consumers in the market
Tastes of consumers
Tastes of consumers
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DETERMINANTS OF MARKETDETERMINANTS OF MARKET
DEMANDDEMAND
PricePrice
Price of substitutes & complementary goodsPrice of substitutes & complementary goods
Consumer incomeConsumer income
Consumers taste & preferenceConsumers taste & preference
Consumers expectationConsumers expectation
Demonstration effectDemonstration effect
Consumer credit facilityConsumer credit facility
Population of the countryPopulation of the country
Distribution of national incomeDistribution of national income
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DEMAND SHIFTERSDEMAND SHIFTERS
Tastes
Income
Information Expectations
Other prices
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EXCEPTIONS TO LAW OFEXCEPTIONS TO LAW OF
DEMANDDEMAND
GIFFEN GOODSGIFFEN GOODS
ARTICLES OF DISTINCTIONARTICLES OF DISTINCTION
EXCEPTION OF RISE & FALL IN PRICE INEXCEPTION OF RISE & FALL IN PRICE INFUTUREFUTURE
IGNORANCE ON THE PART OFIGNORANCE ON THE PART OF
CONSUMER ABOUT
QUALITY
CONSUMER ABOUT
QUALITY
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normal good inferior good Ordinary good Giffen good
Consumption
Income Up up down down up
Income down down up up down
Income change Price change
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THANK YOUTHANK YOU