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About me NAME : KANHAIYA GAMBHIR DESIGNATION PGT(COMMERCE) WORKING : IN AN IB SCHOOL EXPERIENCE: MORE THAN 15 YEARS
Chapter- Demand Analysis Topic- Law of Demand and its Factors
Topics To be discussed Meaning of Demand Law of Demand Determinants/Factors of Demand
Definition of Demand Demand refers to the quantity or value of goods or services that a consumer is Willing and able to purchase at a particular price during a period of time.
Law of Demand Law of demand states that as more as the prices of the commodity increases, its demand decreases and vice-versa, holding other factors constant.
Factors of Demand (Pc, Pr, I, T, O) Prices of the commodity: As law of demand states that when the prices of the commodity increases its demand decreases and vice-versa, it shows that there is a negative relationship between the prices of the commodity and its quantity demanded Prices of related commodities: Related commodities means the demand of which may be affected if the prices of other commodities changes. Related commodities are of two types-
i.) Substitute goods: Those goods which can be demanded on behalf of one another. E.g Tea or Coffee, Pepsi or Coke. There is positive relationship between the prices of one commodity and the demand of its substitute. ii.) Complementary goods: Those goods which are used simultaneously E.g. Bread and butter, Car and petrol, Pen and ink. There is negative relationship between the prices of one commodity and the demand of its complementary good.
Income of Consumers: Income of consumer is directly related to the ability to purchase of a consumer. As more and more the income of the consumer increases the more will be the demand and vice - versa, so there is positive relationship between the income of consumer and demand for a commodity.
Taste & preferences: If the taste of the consumer changes in favour of a commodity then the demand for that commodity increases and if the taste of the consumer changes against the commodity then demand for that commodity decreases. Other factors i.) Distribution of Income: ii.) Demonstration effect:
Hey this is Kanhaiya Gambhir. I'm an IB educator and PGT Commerce . 15 years of Teaching experience, Expert at CA and in UGC NET Commercial