Mohsan Tanveer Economics Demand

7/31/2019 Mohsan Tanveer Economics Demand

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MICRO ECONOMICS

ASSIGNMENT

PRESENTED BYMOHSAN TANVEER

ROLL NO.5

MBA(IRM)

PRESENTED TO

MADAM TEHREEM SADIQ

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LAW OF DEMAND

Other things equal,as price falls the quantity demanded

rises,and as price rises,the quantity demanded falls

In short there is a negative or inverse relationship between price and

quantity demanded,economists call this inverse relationship the LAW OFDEMAND.

THE DEMAND CURVE

SCHEDULEPRICE Qd

5 10

4 20

3 30

2 40

1 50

D

D

0

1

2

3

4

5

6

010 20 30 40 50 60

QUANTITY DEMANDED

PRICE

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CHANGE IN DEMAND

A change in one or more of the determinants of demand will change the

demand data; the change in demand data will shift the demand curve that is

called change in demand.

CHANGE IN BUYERS TASTE:- A favourable change inconsumer tastes for a product is a change that makes a product more

desirable means that more of it will be demanded, the demand curve will

shift rightward, whereas an unfavourable change in consumer taste will

decrease the demand shifting the demand curve to left.

New products may affect consumer tastes, for example introduction of

laptops decrease the demand for desktop computers.

SCHEDULEPRICE Qd Increase Decrease

50 1 2 0

40 2 3 1

30 3 4 2

20 4 5 3

10 5 6 4

D

D D1

D1

D2

D2

0

10

20

30

40

50

60

0 1 2 3 4 5 6 7

QUANTITY DEMANDED

PRICE

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CHANGE IN NUMBER OF BUYERS:- An increase in numberof buyers is likely to increase product demand; a decrease in number of

buyers will decrease the demand.

For example: if the population of a particular area increase demand for thevegetables will increase in that area, and if population decrease the demand

will also decrease.


5 50 100 0

4 100 150 50

3 150 200 100

2 200 250 150

1 250 300 200

D

D D1

D1D2

D2

0

1

2

3

4

5

6

0 100 200 300 400

QUANTITY DEMANDED

PRICE

EXPLANATION:- In the diagram D is showing the original demand curveand D1 is showing the increase in demand and D2 is showing the decrease in

demand and this change in demand is due to change in number of buyers.

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CHANGE IN INCOME:- Income affects demand,for mostproducts a rise in income causes an increase in demand,products whose

demand varies directly with income are called superior goods or normal goods

although most products are normal goods but there are some exceptionsrising income may also decrease the demand,goods whose demand varies

inversely with income are called inferior goods.


10 10 20 0

8 20 30 10

6 30 40 20

4 40 50 30

2 50 60 40

D

D

D1

D1

D2

D2

0

2

4

6

8

10

12

0 20 40 60 80

QUANTITY DEMANDED

PRICE

EXPLANATION:- In the above diagram D is showing original demand andD1 is showing increase in demand and D2 is showing decrease in demand, this

diagram shows that income affects the demand for a product.

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CHANGE IN PRICES OF RELATED GOODS:- A change inprice of related good may either increase or decrease the demand for a

product, depending on whether the related goods are a substitute or a

complement.The related goods can be:

Substitute

Complement

Unrelated goods


12 2 4 110 3 5 2

8 4 6 3

6 5 7 4

4 6 8 5

D

D D1

D1

D2

D2

0

2

4

6

8

10

12

14

0 2 4 6 8 10

QUANTITY DEMANDED

PRICE

EXPLANATION:- The diagram is showing that due to change in priceof related goods the price for a particular commodity may increase or

decrease.

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CONSUMER EXPECTATIONS:- Changes in consumerexpectations may shift demand,a newly formed expectation of higher

future prices may cause consumers to buy now in order to beat the

anticipated price rises thus increasing current demand.For example:expectation of consumers are that prices of warm clothes

will increase in coming winter season,so they increase the demand of

warm clothes and vice versa.

SCHEDULEPRICES Qd Increase Decrease

600 2 3 0.87

500 4 5 3

400 6 7 5

300 8 9 7

200 10 11 9

100 12 13 11

D

D1

D1D2

D

0

100

200

300

400

500

600

700

0 5 10 15

QUANTITY DEMANDED

PRICE

EXPLANATION:- Due to favourable change in expectation theconsumer increase the demand and curve shifts upward and if demand

decreases curve shifts downward.

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Mohsan Tanveer Economics Demand