PPT: Demand and Elasticity of Demand | Economics Class 11 - Commerce PDF Download

 Page 1


DEMAND
THEORY
Page 2


DEMAND
THEORY
What is a Demand ?
Demand can be defined as the willingness and ability of consumers to purchase a given 
amount of a good or service at a given price.
In another term, demand for any commodity is the desire, ability and willingness to buy a 
product or service.
Illustration:
? Desire to have a Mercedes but do not have enough money - Wishful Thinking
? In Spite of having the money, you do not want to spend on Mercedes - Want
? Your desire to have a Mercedes with the ability and willingness to pay for it combined 
together will be - Demand
Page 3


DEMAND
THEORY
What is a Demand ?
Demand can be defined as the willingness and ability of consumers to purchase a given 
amount of a good or service at a given price.
In another term, demand for any commodity is the desire, ability and willingness to buy a 
product or service.
Illustration:
? Desire to have a Mercedes but do not have enough money - Wishful Thinking
? In Spite of having the money, you do not want to spend on Mercedes - Want
? Your desire to have a Mercedes with the ability and willingness to pay for it combined 
together will be - Demand
What is a Demand Function ?
Demand function shows the functional relationship between quantity demanded for a 
commodity and its various determinants.
Demand functions measures how much of a given commodity consumers will demand at 
various prices, income levels, or values of other variables that affect demand.
There are two types of Demand Functions:
? Individual Demand Function
? Market Demand Function
Page 4


DEMAND
THEORY
What is a Demand ?
Demand can be defined as the willingness and ability of consumers to purchase a given 
amount of a good or service at a given price.
In another term, demand for any commodity is the desire, ability and willingness to buy a 
product or service.
Illustration:
? Desire to have a Mercedes but do not have enough money - Wishful Thinking
? In Spite of having the money, you do not want to spend on Mercedes - Want
? Your desire to have a Mercedes with the ability and willingness to pay for it combined 
together will be - Demand
What is a Demand Function ?
Demand function shows the functional relationship between quantity demanded for a 
commodity and its various determinants.
Demand functions measures how much of a given commodity consumers will demand at 
various prices, income levels, or values of other variables that affect demand.
There are two types of Demand Functions:
? Individual Demand Function
? Market Demand Function
What is a Demand Function ?
Factors determining Individual Demand Function
Individual Demand is a Function of : 
Dx = f ( Px, PR, Y, T, E )
Where, Dx = Demand for the commodity X
Px = Price of the commodity X
PR = Price of the related goods
Y = Income of the consumers
T = Taste and Preference
E = Expectations of the buyers
Page 5


DEMAND
THEORY
What is a Demand ?
Demand can be defined as the willingness and ability of consumers to purchase a given 
amount of a good or service at a given price.
In another term, demand for any commodity is the desire, ability and willingness to buy a 
product or service.
Illustration:
? Desire to have a Mercedes but do not have enough money - Wishful Thinking
? In Spite of having the money, you do not want to spend on Mercedes - Want
? Your desire to have a Mercedes with the ability and willingness to pay for it combined 
together will be - Demand
What is a Demand Function ?
Demand function shows the functional relationship between quantity demanded for a 
commodity and its various determinants.
Demand functions measures how much of a given commodity consumers will demand at 
various prices, income levels, or values of other variables that affect demand.
There are two types of Demand Functions:
? Individual Demand Function
? Market Demand Function
What is a Demand Function ?
Factors determining Individual Demand Function
Individual Demand is a Function of : 
Dx = f ( Px, PR, Y, T, E )
Where, Dx = Demand for the commodity X
Px = Price of the commodity X
PR = Price of the related goods
Y = Income of the consumers
T = Taste and Preference
E = Expectations of the buyers
What is a Demand Function ?
Factors determining Market Demand Function
Individual Demand is a Function of : 
Dx = f ( Px, PR, Y, T, E, N, DI, G )
Where, Dx = Demand for the commodity X
Px = Price of the commodity X
PR = Price of the related goods
Y = Income of the consumers
T = Taste and Preference
E = Expectations of the buyers
N = Number of Customers in Market
DI = Distribution of Income (DI)
G = Government Policy