Class 11ᵗʰ

COMMERCE
ECONOMICS
DEMAND
Demand

Characters
Determinants of Demand (Individual Demand)

DESIRE MEANS A MERE WISH TO HAVE A COMMODITY.

WANT IS THAT DESIRE WHICH IS BACKED BY THE ABILITY AND WILLINGNESS TO SATISFY IT.

₹ 2 Crore
Demand

Determinants of Demand (Individual Demand)

DEMAND IS THE QUANTITY OF A COMMODITY THAT A CONSUMER

IS WILLING AND ABLE TO BUY, AT EACH POSSIBLE PRICE DURING A
GIVEN PERIOD OF TIME.

Willingness to buy. Price of the commodity.

Ability to purchase Period of time.

₹ 1,20,000
Demand
Types of Demand

Individual Demand Market Demand

1 Litre

6 Litre
1 Litre

1.5 Litre 2 Litre

Demand

DETERMIN Determinants of Demand (Individual Demand)

ANTS OF
Individual demand Market demand
DEMAND
Individual demand refers to the Market demand refers to the quantity
(INDIVIDU
quantity of a commodity that a of a commodity that all consumers
AL consumer is willing and able to buy, are willing and able to buy, at each
at each possible price during a given possible price during a given period of
DEMAND) period of time. time.
Demand

Determinants of Demand (Individual Demand)

Determinants of Demand

Expectation of
Price of the Given Price of Related Income of the Tastes and
Change in the
Commodity Goods Consumer Preferences
Price in Future
Demand

Determinants of Demand (Individual Demand)

Price of the Given Commodity - It is the most important factor affecting demand
for the given commodity Generally, there exists an inverse relationship between
price and quantity demanded. It means, as price increases, quantity demanded
falls due to decrease in the satisfaction level of consumers.

₹ 10 | 2 packs ₹ 20 | 1 packs
Demand

Types of Related Goods

Substitute goods Complementary goods

Substitute goods are those goods which can be

Complementary goods are those goods which are
used in place of one another for satisfaction of a
used together to satisfy a particular want.
particular want.

TEA COFFEE CAR PETROL

Demand

Income of a Consumer

Normal Goods Inferior Goods

Increase in income leads to rise in its demand, Increase in income reduces the demand, while a
while a decrease in income reduces the demand. decrease in income leads to rise in demand.

RS. 1000 RS. 100

Demand

Determinants of Demand (Individual Demand)

Tastes and Preferences - Tastes and preferences of the consumer directly influence
the demand for a commodity. If a commodity is in fashion or is preferred by the
consumers, then demand for such a commodity rises. On the other hand, demand
for a commodity falls, if the consumers have no taste for that commodity.

KOREAN FOOD
Demand

Determinants of Demand (Individual Demand)

Expectation of Change in the Price in Future - If the price of a certain commodity is

expected to increase in near future, then people will buy more of that commodity
than what they normally buy There exists a direct relationship between
expectation of change in the prices in future and change in demand in the current
period.

Olivia

₹ 50,000
Demand

Determinants of Market Demand

Size and Composition Season and Distribution of

of Population Weather Income

Increase in population raises the market The seasonal and weather conditions If income in the country is equitably
demand, while decrease in population also affect the market demand for a distributed, then market demand for
reduces the market demand. commodity. commodities will be more. However, if
income distribution is uneven, i.e.
people are either very rich or very poor,
then market demand will remain at
lower level.
Demand

Demand Functions
Demand function shows the relationship between quantity demanded
for a particular commodity and the factors influencing it.

Individual Demand Function - Individual demand

function refers to the functional relationship
between individual demand and the factors
affecting individual demand.
It is expressed as:
Demand

Demand Functions
Where,
= Demand for Commodity x = Price of the given Commodity x
= Prices of Related Goods; = Income of the Consumer;
= Tastes and Preferences; = Expectation of Change in Price in future
Demand function is just a short-hand way of saying that quantity demanded ( ), which is on the left-
hand side, is assumed to depend on the variables that are listed on the right-hand side.
Demand

Demand Functions
Market Demand Function - Market
demand function refers to the fuctional
relationship between market demand
and the factors affecting marked demand.

= Market demand of commodity x; = Price of the given Commodity x

= Prices of Related Goods; = Income of the Consumer;
= Tastes and Preferences; = Expectation of Change in Price in future
= Size and Composition of population; = Season and Weather;
= Distribution of Income.
Demand

Demand Schedule
Demand schedule is a tabular statement showing
various quantities of a commodity being demanded
at various levels of price, during a given period of
time.

Individual Demand Schedule Market demand schedule

It refers to a tabular statement showing It refers to a tabular statement showing
various quantities of a commodity that various quantities of a commodity that
a consumer is willing to buy at various all the consumers are willing to buy at
levels of price, during a given period of various levels of price, during a given
time. period of time.
Demand
Demand Schedule

Individual Demand Schedule Market Demand Schedule

Price in (₹) Sanidhya Sir Individual Demand (in units) Market

Price in (₹) Demand
5 1 Sanidhya Sir Digraj Sir (in units)

4 2 5 1 2 1+2= 3

4 2 3 2+3=5
3 3
3 3 4 3+4=7
2 4
2 4 5 4+5 =9
1 5 1 5 6 5 + 6 = 11
Demand

Demand Curve
It is a graphical representation of demand schedule.

Market demand curve refers to a

Individual Demand Curve refers
graphical representation of market
to a graphical representation of
demand schedule. It is obtained by
individual demand schedule.
horizontal summation of individual
demand curves.
Demand

Demand Curve

Slope of Demand Curve

Slope of a curve is defined as the change in the
variable on the Y-axis divided by the change in
the variable on the X-axis. So, the slope of the
Demand Curve equals the Change in Price
divided by the Change in Quantity.

i.e. Slope of Demand Curve =

Demand

Law of demand

Law of demand states the inverse relationship between price and quantity
demanded, keeping other factors constant (ceteris paribus) This law is also
known as 'First Law of Purchase'.
Assumption of Law of Demand
Prices of substitute goods do not change.
Prices of complementary goods remain constant.
Income of the consumer remains the same.
There is no expectation of change in price in the future.
Tastes and preferences of the consumer remain the same.
Important Facts about Law of Demand

Inverse Qualitative No One

Relationship not Proportional Sided
Quantitative Relationship
PRICE

DEMAND
Reasons of Law of Demand

Law of Substitution Income Additional Different

Diminishing Effect Income effect Customers Uses
Marginal Utility Substitution effect refers to effect on When price of a Some commodities
Law of diminishing refers to demand when real commodity falls, like milk,
marginal utility substituting one income of the many new electricity, etc.
states that as we commodity in consumer changes consumers, not in a have several uses,
consume more and place of other due to change in position to buy it some of which are
more units of a when it becomes price of the given earlier due to its more important
commodity, the relatively cheaper. commodity. high price, starts than the others.
utility derived from purchasing it.
each successive
unit goes on
decreasing.
Demand

Exceptions to Law of Demand

In certain special circumstances the Law of Demand fails i.e.
rise in price may increase the demand.

Giffen Goods
These are special kind of inferior goods on
which the consumer spends a large part of
his income and their demand rises with an Sir Robert Giffen
increase in price and demand falls with
decrease in price.
Demand

Exceptions to Law of Demand

Fashion related goods
Goods related to fashion do not follow
the law of demand and their demand
increases even with a rise in their prices.
Demand

Exceptions to Law of Demand

Fear of Shortage
If the consumers expect a shortage or
scarcity of a particular commodity in the
near future, they would start buying more
and more of that commodity in the current
period even if their prices are rising.
Demand

Exceptions to Law of Demand

Ignorance
Consumers may buy more of a commodity at
a higher price when they are ignorant of the
prevailing prices of the commodity in the
market.
Demand

Exceptions to Law of Demand

Status Symbol Goods or Goods of

Ostentation

The exception relates to certain prestige

goods which are used as status symbols.
Demand

Exceptions to Law of Demand

Necessities of Life
Another exception occurs in the use
of such commodities, which become
necessities of life due to their
constant use.
Demand

Exceptions to Law of Demand

Change in Weather
With change in season/weather, demand for
certain commodities also changes,
irrespective of any change in their prices.

SWEATER LUNGI
Demand

Known as
Demand

Expansion in Demand

Expansion in demand refers to a rise in the quantity demanded due

to a fall in the price of commodity, other factors remaining
constant.
It leads to a downward movement along the same demand
curve.
It is also known as 'Extension in Demand' or 'Increase in
Quantity Demanded'.

Price in (₹) Demand Unit

20 100

15 150
Demand

Contraction in Demand

Contraction in demand refers to a fall in the quantity demanded due to a

rise in the price of commodity, other factors remaining constant.
It leads to an upward movement along the same demand curve.
It is also known as 'Decrease in Quantity Demanded'.

Price in (₹) Demand Unit

20 100

25 70
Demand
Demand

Increase in Demand

Increase in Demand refers to a rise in the demand of a commodity

caused due to any factor other than the own price of the commodity.

Price in (₹) Demand Unit Income

20 100 10000

20 150 20000
Demand

Decrease in Demand

Decrease in Demand refers to a fall in the demand of a commodity caused

due to any factor other than the own price of the commodity.

Price in (₹) Demand Unit Income

20 100 10000

20 70 5000
Demand

Shift in Demand Curve (Change in Demand)

A change in one of 'other factors' shifts the demand curve.

When the demand of a commodity changes due to change in any factor
other than the own price of the commodity, it is known as change in
demand. It is expressed as a shift in the demand curve.
Change in price of substitute goods;
Change in price of complementary goods;
Change in income of consumers;
Change in tastes and preferences;
Expectation of change in price in future;
Change in population;
Change in distribution of income;
Change in season and weather.
Demand
Change in Quantity Demanded Vs Change in Demand
Forms of Business Organisation

Kinds of Demand
Price Demand
Price demand refers to a relationship between the price and demand of a
commodity, assuming other factors constant.

Income Demand
Income demand refers to a relationship between the income of consumer and the
quantity demanded of a commodity, assuming other factors constant.

Cross Demand
Cross demand refers to a relationship between the demand of a given commodity
and the prices of related commodities, assuming other things remaining the same.
Forms of Business Organisation

Kinds of Demand
Joint Demand
When two or more goods are demanded simultaneously to satisfy a particular
want, then such a demand is called joint demand.

Composite Demand SWEET

PANEER
When a commodity can be put to several uses, its demand is known as CHEESE
composite demand. BUTTER

Derived Demand
Demand for a commodity, which depends on the demand for other goods,
is known as derived demand.
Forms of Business Organisation

Kinds of Demand
Direct Demand
When a commodity satisfies the wants directly, its demand is termed as direct
demand.

Alternative Demand
Demand is known as alternative demand, when it can be satisfied by
different alternatives.

Competitive Demand
Two goods are close substitutes of each other and increase in demand for one of them will
decrease the demand for the other, then the demand for any one is called Competitive demand.
Join our telegram channel

Nexttoppersofficial
SANI SIR IR
* *GIFFEN
SIR *MARSHALL S

CLASS 11ᵗʰ
ECONOMICS DEMAND
RAPID REVISION
*next topper
students Class 11ᵗʰ
ECONOMICS
DEMAND
DEMAND
Demand is the quantity of a DEMAND FUNCTION DEMAND CURVE
commodity that a consumer Graphical Representation
Demand function shows the
is willing and able to buy, at
relationship between INDIVIDUAL MARKET
each possible price during a
quantity demanded for a
given period of time.
particular commodity and the
TYPES OF DEMAND factors influencing it.
INDIVIDUAL MARKET

Demand Schedule
INDIVIDUAL Tabular Representation LAW OF DEMAND
MARKET
Price Population Law of demand states the inverse
INDIVIDUAL MARKET
Related Goods Season & Weather relationship between price and
quantity demanded, keeping other
Price in (₹) Sanidhya Sir Individual Demand (in
Market
Income Distribution of Price in (₹)
units)
Demand
Future Price Income 5 1 (in units) factors constant (ceteris paribus).
Sanidhya Sir Digraj Sir

Taste 4 2 5 1 2 1+2= 3 Inverse Relationship

3 3 4 2 3 2+3=5
Qualitative not Quantitative
No Proportional Relationship
2 4 3 3 4 3+4=7
One Sided
1 5 2 4 5 4+5 =9

1 5 6 5 + 6 = 11
DEMAND
EXCEPTIONS TO LAW OF
DEMAND
Giffen Goods
Fashion related goods
Fear of Shortage
Ignorance
Necessities of life
change in weather
status symbol goods

SHIFT IN DEMAND CURVE

(CHANGE IN DEMAND)
Change in price of substitute
goods;
Change in price of
complementary goods;
Change in income of consumers;
Change in tastes and
preferences; Kinds of Demand
Price Demand Cross Demand Composite Demand Direct Demand
Income Demand Joint Demand Derived Demand Alternative Demand
Important Difference Between Questions
Important Difference Between Normal Goods and Inferior Goods.
Basis Normal Goods Inferior Goods

Meaning It refer to those goods whose demand increases with an increase in income. It refer to those goods whose demand decreases with an increase in income.

Income Effect Income effect is positive in case of normal goods. Income effect is negative in case of inferior goods.

Relation There is a direct relation between income and demand for normal goods. There is an inverse relation between income and demand for inferior goods

Normal Goods always follow the law of demand, ie. there always exists inverse Law of demand may fail in case of inferior goods, i.e. there may or may not be an
Law of Demand
relation between price of the commodity and its quantity demanded. inverse relation between price of the commodity and its quantity demanded.

"Full Cream Milk' is a normal good if its demand increases with an increase in
Example 'Toned Milk' is an inferior good if its demand decreases with an increase in income.
income.

Important Difference Between Substitute Goods and Complementary Goods.

Basis Substitute Goods Complementary Goods
Substitute goods refer to those goods which can be used in place of one another to Complementary goods refer to those goods which are used together to satisfy a
Meaning
satisfy a particular want. particular want.

Nature of Demand Substitute goods have competitive demand Complementary goods have joint demand

Price of one substitute good has positive relationship with quantity demanded of Price of a complementary good has negative relationship with quantity demanded of
Relation
another substitute good. another complementary good.

Example (i) Tea and Coffee; (ii) Coke and Pepsi.. (i) Tea and Sugar; (ii) Car and Petrol.
Important Difference Between Contraction in Demand and Decrease in Demand.
Basis Contraction in Demand Decrease in Demand
When the quantity demanded falls due to an increase in the price, keeping other Decrease in Demand refers to a fall in the demand of a commodity caused due to
Meaning
factors constant, it is known as contraction in demand. any factor other than the own price of the commodity

Price Demand (Units) Price Demand (Units)

Tabular Presentation 10 150 10 150
12 100 10 100

Effect on Demand Curve There is an upward movement along the same demand curve There is a leftward shift in the demand curve.

It occurs due to an unfavourable change in the other factors like decrease in the
Reason It occurs due to an increase in the price of the given commodity. prices of substitutes, increase in the prices of complementary goods, decrease in
income in case of normal goods, etc.

Important Difference Between Expansion in Demand and Increase in Demand

Basis Expansion in Demand Increase in Demand
When the quantity demanded rise due to an decrease in the price, keeping other Increase in Demand refers to a rise in the demand of a commodity caused due to
Meaning
factors constant, it is known as expansion in demand. any factor other than the own price of the commodity

Price Demand (Units) Price Demand (Units)

Tabular Presentation 12 100 12 150
10 150 12 100

Effect on Demand Curve There is a downward movement along the same demand curve There is a rightward shift in the demand curve.

It occurs due to an favourable change in the other factors like Increase in the prices
Reason It occurs due to an decrease in the price of the given commodity. of substitutes, decrease in the prices of complementary goods, increase in income in
case of normal goods, etc.
Join our telegram channel

Nexttoppersofficial