Ayussh Sanghi is teaching live on Unacademy Plus
INTRODUCTION TO INDIAN ECONOMY 1.4 MARKET FORCES (DEMAND PRESENTED BY AYUSSH SANGHI
ABOUT ME Passionate about Teaching >Taught at most reputed Civil Services Institutes >CA, Lawyer Follow me on: https://unacademy.in/user/ AyusshSanghi
UNDERSTANDING MARKET FORCES When there is adverse monsoon in India, the prices of food rise throughout the country. As the mercury levels rise in Delhi, prices of hotel rooms in a hill station increase. During the summer holidays of children, the prices of air tickets for tourism rise. What do all these events have in common? They all show the working of demand and supply
UNDERSTANDING MARKET FORCES pply and Demand are used by economist in context of Market Forces. O Supply and Demand are used by economist in o They determine the quantity of each good produced and the price at which it is sold. If one wants to know how any policy change will affect the economy, one must think first about how it will affect supply and demand.
UNDERSTANDING MARKET FORCES o This is the theory of demand and supply. It considers how buyers and sellers react and how they interact with each another. o It shows how supply and demand determine a market economy and prices in a market economy and how prices, in turn, allocate the economy's scarce resources.
DEMAND Willingness to buy/ purchase o The quantity demanded of any good is the amount of the good that buyers are willing and able to purchase. Many factors determine the quantity demanded of any good, but while analysing how markets work, one factor plays a central role - the price of good If the price of the Gulab Jamun rose to Rs. 100 per piece, you would buy less Gulab Jamun. If the price of Gulab Jamun fell to Rs. 10 per piece, you would buy more. Because the quantity demanded falls as the price rises and rises as the price falls, we say that the quantity demanded is negatively related to the price. o This relationship between price and quantity demanded is true for most goods in the economy and economists call it the Law of Demand
DEMAND Hence it can be derived that, Other things equal, when the price of a rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises. good
LAW OF DEMAND Demand Relationship Demand Q1 Q2 o Quantity
LAW OF DEMAND The downward-sloping line relating price and quantity demanded is called the demand curve.
MOVEMENT ALONG DEMAND CURVE Changes along a curve refers to a movement along a demand curve. A movement along demand curve occurs when a change in the quantity demanded is caused only by a change in price, and vice versa When there is a movement along the demand curve, a movement denotes a change in both price and quantity demanded from one point to another on the curve. A movement along the demand curve will occur when the price of the good changes and the quantity demanded changes in accordance to the original demand relationship