Factors Influencing Individual Demand
Factors Influencing Market Demand
The Law of Demand indicates that, all else being equal, when the price of a good decreases, the quantity demanded increases, and when the price increases, the quantity demanded decreases.
Demand Schedule vs. Market Demand Schedule
Individual Demand Curve and Market Demand Curve
Individual Demand Curve
Market Demand Curve
The demand curve slopes downward to the right because there is an inverse relationship between the price of a good and the quantity demanded. When the price of a good falls, more of it is purchased. Several factors contribute to this downward-sloping demand curve:
Exceptions to the Law of Demand
1. Giffen Effect: The Giffen effect is observed in certain inferior goods consumed by low-income individuals. When the price of such a commodity rises, poor people may reduce their purchases of more expensive items and increase their consumption of this commodity. For example, if the price of bread rises, low-income individuals may buy more bread and less of other more expensive foods.
2. Bandwagon Effect: The bandwagon effect occurs when a consumer’s demand for a commodity is influenced by the preferences and tastes of the social class to which the consumer belongs. For instance, if a particular brand of clothing becomes popular within a social group, individuals within that group may increase their demand for that brand, regardless of their personal preferences.
Demand for any commodity depends on several factors besides its price. These factors were categorised as price of the commodity in category 1 and all factors other than price in category 2. Based on these categories of factors influencing demand, changes in demand are divided into
Causes behind Shifts of Demand
46 docs|8 tests
|
1. What is the Law of Demand and how does it explain consumer behavior? | ![]() |
2. What are individual demand curves and how do they differ from market demand curves? | ![]() |
3. Why does the demand curve typically slope downwards? | ![]() |
4. What are some exceptions to the Law of Demand? | ![]() |
5. What is the difference between a change in quantity demanded and a change in demand? | ![]() |