CLASS 11 MICROECONOMICS
CHAPTER: DEMAND
Quick Revision Notes with Key Terms, Schedules & Diagrams
1. Meaning of Demand
Demand is the quantity of a good or service that a consumer is willing to purchase and is able to pay for, at a
given price, during a given period of time.
• Desire: wanting a good — not counted as demand unless backed by purchasing power.
• Willingness to pay: the consumer must be ready to spend money on the good.
• Ability to pay: the consumer must actually have enough income/money.
• Time period: demand is always expressed with reference to a specific period (per day, week, month).
A demand only becomes "effective demand" when desire + willingness + ability to pay all exist together.
2. Demand Function
Demand Function expresses the relationship between quantity demanded (Dx) and the factors that affect it:
Dx = f (Px, Pr, Y, T, Pe)
• Px: Price of the good itself
• Pr: Price of related goods (substitutes & complements)
• Y: Income of the consumer
• T: Tastes & preferences
• Pe: Expected future price
3. Determinants of Demand
• Price of the commodity: Higher the price, lower the quantity demanded (inverse relation).
• Price of related goods: Rise in price of a substitute (e.g., tea) raises demand for the good (e.g., coffee); rise
in price of a complement (e.g., car) lowers demand for its pair (e.g., petrol).
• Income of the consumer: For a normal good demand rises with income; for an inferior good demand falls as
income rises.
• Tastes, preferences & fashion: Favourable trends raise demand; going out of fashion lowers it.
• Expectation of future price: Expecting a price rise increases current demand, and vice-versa.
4. Individual Demand Schedule & Curve
• Demand Schedule: a tabular statement showing the quantity demanded of a good at different prices, other
factors remaining constant (ceteris paribus).
Price (₹ per unit) Quantity Demanded (units)
1 50
Price (₹ per unit) Quantity Demanded (units)
2 40
3 30
4 20
5 10
Fig 1: Individual Demand Curve — slopes downward from left to right, showing the inverse Price–Quantity relationship
• Demand Curve: a graphical representation of the demand schedule, plotting Price (Y-axis) against Quantity
Demanded (X-axis).
5. Market Demand
• Market Demand: the sum total of the demands of all individual consumers in the market for a good, at each
possible price — found by horizontal summation of individual demand curves.
Price (₹) Consumer A Consumer B Market Demand (A+B)
1 12 18 30
2 9 14 23
3 6 10 16
4 3 6 9
5 1 3 4
Fig 2: Market demand curve derived by horizontally adding individual demand curves
6. Law of Demand
Statement: Other things remaining constant (ceteris paribus), the quantity demanded of a good is inversely
related to its price — as price rises, quantity demanded falls, and as price falls, quantity demanded rises.
Assumptions (Ceteris Paribus conditions)
• No change in consumer's income
• No change in prices of related goods
• No change in tastes & preferences
• No change in consumer's expectations about future prices
• No change in population / number of consumers
Why does the demand curve slope downward?
• Law of Diminishing Marginal Utility: each successive unit of a good gives lower satisfaction, so a
consumer buys more only if price falls.
• Income Effect: a fall in price raises the real purchasing power of income, so the consumer buys more.
• Substitution Effect: a fall in price makes the good relatively cheaper than its substitutes, so consumers
substitute towards it.
• New consumers: a lower price brings in buyers who could not previously afford the good, expanding total
demand.
7. Movement Along vs Shift of the Demand Curve
• Movement along the demand curve: change in quantity demanded caused ONLY by a change in the price
of the good itself; the demand curve stays the same.
Term Cause Direction
Expansion (Extension) Fall in price of the good Movement downward
along the same curve
Contraction Rise in price of the good Movement upward along
the same curve
Fig 3: Movement along the demand curve — Expansion (B) and Contraction (C)
• Shift of the demand curve: change in demand caused by factors OTHER than the price of the good (income,
tastes, price of related goods, etc.); the whole curve moves.
Term Cause (example) Direction
Increase in Demand Rise in income / favourable taste Curve shifts rightward
change (DD → D1D1)
Decrease in Demand Fall in income / unfavourable taste Curve shifts leftward (DD
change → D2D2)
Fig 4: Rightward shift = Increase in demand; Leftward shift = Decrease in demand
8. Exceptions to the Law of Demand
In the following cases the demand curve slopes upward (positive Price–Quantity relation):
• Giffen Goods: inferior goods (e.g., coarse cereals) on which a large part of income is spent — a price rise
forces poorer consumers to buy MORE of it and cut costlier substitutes (Giffen Paradox).
• Veblen Goods (Articles of Ostentation / Snob Value): luxury/status goods such as diamonds, where a
higher price signals higher prestige, raising demand.
• Necessities of life: basic essentials (salt, medicines) are bought in nearly the same quantity regardless of price
change.
• Expectation of further price change: if consumers expect price to rise further, they buy more even at a
currently high price (and vice-versa).
• Speculative / Share market goods: buyers purchase more shares/commodities when prices are rising,
expecting further gains.
Fig 5: Exception to the Law of Demand — upward sloping demand curve (Giffen good)
9. Quick Recap (Key Terms at a Glance)
Key Term One-line Meaning
Demand Desire + willingness + ability to pay, at a price, in a time period
Demand Schedule Table of price & quantity demanded
Demand Curve Graph of the demand schedule; slopes downward
Law of Demand Price ↑ → Quantity Demanded ↓ (ceteris paribus)
Movement (Expansion/Contraction) Due to change in own price; same curve
Shift (Increase/Decrease) Due to non-price factors; curve moves
Giffen Good Exception — inferior good, upward sloping demand
Veblen Good Exception — prestige/status good, upward sloping demand