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DEMAND ANALYSIS
Dr. Yogita Yadav
(Assistant Professor)
School of Humanities & Social Sciences
BBD University Lucknow
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Meaning and Definition of Demand
Demand is defined as “the quantity of goods or services desired
by an individual, backed by the ability and willingness to pay.
Meaning of Demand Analysis
Demand analysis seeks to search out and measure the forces
that determine sales. It means the study of factors which
influence the demand of commodity or services.
Importance of Demand Analysis
Manipulating Demand
Forecasting Demand
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Types of Demand
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Demand Function
Demand function is a comprehensive formulation which specifies the factors that
influence the demand for the product.
There are two types of demand function
Individual Demand Function
Dx = f (Px)
Where D=Demand, P=Price, f=Function
Market Demand Function
Dx = f (Px, Y, Py, Ep, T, Pp, A, U)
Where D=Demand, The demand of Commodity x (Dx) , The function of commodity
x (f), Price of good or service (Px) , Incomes of buyers (Y), Prices of related goods &
services (Py) , The Expected future price of the product (Ep) , Taste patterns of users
(T) , Number of buyers in the market (Pp) , Distribution of Income (A) ,Government
Policy (U)
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Law of Demand
It states that higher the price, the lower would be the quantity demanded in the
market and the lower the price, the higher would be the quantity demanded in the
market. It explains inverse relationship between price and demand.
Assumptions of Law of Demand
Income level should remain constant
Taste of buyer should not change
Price of other goods should remains constant
No new substitute should be developed
Price rise in future should not be expected.
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Demand Schedule and Demand
Curve
Demand Schedule is a table which shows the relationship between price and
demand of commodity per unit of time.
Demand curve is graphical representation of demand schedule.
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Reasons for Downward slope of
Demand Curve
Law of diminishing marginal utility
Substitution Effect
Income Effect
Change in the number of consumers
Different Uses of commodity
Tendency to satisfy unsatisfied wants
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Exceptions to the Law of Demand
Giffin’s Paradox
Conspicuous Necessities
Commodities of Prestige
Expectations of Future Change in price
Ignorance of Consumers
Emergencies
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Movements along the Demand Curve
Movement along demand curve indicates change in the quantity demanded
because of price changes, other factors remaining constant.
Expansion and Contraction in Demand
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Shift in Demand Curve
A shift of demand curve indicates there is a change in demand at each possible
price because one o more other factors, such as income, taste or the price of
some other goods have changed.
Increase and Decrease in Demand
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Determinants of Demand
Price of Commodity
Price of Related Goods
Consumer’s taste and preferences
Consumer’s Income
The Number of consumers in the population
Consumer’s Expectations of future prices
Change in Money Supply
Consumer credit facility
Advertisement and sale propaganda
Consumer’s information
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Thank You!!!