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Indus Institute of Technology & Management

PRESENTED DY : RAVI RANJAN RAJ C.S.E (3rd year)

TOPIC

DEMAND

Demand

DEMAND The quantity of goods or services desired by an individual, backed by the ability and willingness to pay.

Type of demandIndividual and market demandTotal Market and Market Segment DemandIndustry Demand and Company DemandDerived Demand and Direct DemandDemand for Durable and Non-Durable goodsShort-Term and Long term Demand

Individual and market demand

It is based on an individual’s personal taste, income and price of the commodity.

It decides the market strategy for the sales of any commodity, like It’s price business policy and planning.

Total Market and Market Segment DemandThe total market aggregates on the basis of geographical areas, price sensitivities ,sub product, product uses , distribution channels, customer size, genders etc.

Market segment demand differs on the basis of profit margins, seasonal pattern and market compaction.

Industry Demand and Company Demand

Industry demand refers to the total demand for the product of a industry.

Company demand refers to the demand for the particular company which is a part of industry.

Derived Demand and Direct Demand When the demand for an output is associated with the demand for another output, it is called derived demand.

When the demand for an output of commodity is independent of the demand for other product, it is called direct demand.

Demand for Durable and Non-Durable goods Durable goods are the goods which can be used time and again for a consideration period of time. Ex- machinery

Non- Durable goods are the goods which are used up in a single act of consumption. It include all types of services food stuff, raw material etc.

Note- Non-durable goods have more demand than durable goods.

Short-Term and Long-Term DemandShort- term demand refers to the demand for such goods as are demanded over a short period.Ex- C.R.T. T.V.

Long term demand refers to the demand which exists over a long period.Ex-books

Factors Affecting Demand

Price of commodityLevel of IncomeSize of PopulationComposition of PopulationTastes and Preference of Consumers

Factors Affecting Demand

Demand Function

Demand function explains the relationship between the demand for a commodity and the factors determining demand.

Demand Function

The equation shows that demand for commodity X(DX), is the function of (f) Price of commodity X(PX); Price of related goods (Pr); Income of consumer (Y), Taste of consumer (T); Advertisement effect (A); and unknown variables (U).

Law of demand

Law of Demand If the price of any commodity rises, the quantity demanded of that commodity falls.

Elasticity Of Demand

Elasticity of DemandThe ratio of the change in the demand of commodity to the change in it’s price.

Elasticity Of Demand = percentage change in quantity demanded percentage change in determinant of demand

Types of Elasticity of Demand Elastic DemandInelastic DemandPerfectly Elastic DemandPerfectly Inelastic DemandUnit Elasticity

Elastic Demand

Elasticity > 1; Elastic demand

Elasticity is greater than one when the % change in quantity demanded is greater than the % change in price.

Inelastic DemandElasticity is less than one when the % change in the quantity demanded is less than the % change in price.

Elasticity < 1; Inelastic demand

Perfectly Elastic DemandElasticity is infinite when the % change in price is very less or zero.

Elasticity = ∞; Perfectly elastic demand

Perfectly Inelastic DemandThe changes in price do not affect the quantity demand of commodity. So the elasticity is zero

Elasticity = 0; Perfectly Inelastic demand

Unit ElasticityElasticity is one, or unit elasticity if the percentage changes in quantity demanded is equal to the percentage change in price.

Elasticity = 1; Unitary Elastic demand

Measurement

Measurement of Price Elasticity

Price elasticity of demand is generally defined as the responsiveness of demand for a commodity to the changes in its price.

Where: - Q= Original Quantity Demanded. P = Original Price Q = Change in quantity demanded P = change in price.

Income Elasticity = % change in purchases of a goods % change in income

Income Elasticity of DemandThe income elasticity of demand may be defined as the ratio of the % change in purchases of a good to a % change in income.

q= Change in quantity Purchased. q= Initial quantity purchased. Y = initial income. Y= small change in income.

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