Ayussh Sanghi is teaching live on Unacademy Plus
INTRODUCTION TO INDIAN ECONOMY 1.5 CONCEPT OF DEMAND PRESENTED BY AYUSSH SANGHI
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MARKET DEMAND VERSUS INDIVIDUAL DEMAND o Looking at the diagrams in the last lesson, he demand curve shows an individual's demand for a product. To analyze how markets work, we need t determine the market demand, the sum of all the individual demands for a particular good or service.
MARKET DEMAND VERSUS INDIVIDUAL DEMAND The graph in Figure 2 shows the demand curve for Consumer 1&2. We have to sum the individual demand curves horizontally to obtain the market demand curves. That is, to find the total quantity demanded at any price, we add the individual quantities found on the horizontal axis of the individual demand curves.
MARKET DEMAND CURVE Figure 2 Demand Curve for Consumer I Market Demand Demand Curveuve (D+D2) urve (D1+D2) for Consumer II D1 D2 0 2 3 45 0 2 3 4 5 6 7 8 9 Output
MARKET DEMAND CURVE The market demand curve shows how the quantity demanded of a good varies as the price of the good varies, while all the factors that affect how much consumers want to buy are held constant
SHIFT IN THE DEMAND CURVE o The demand curve for ice cream shows how much ice cream people buy at any given price, holding constant the many other factors beyond price that influence consumers' buying decision
SHIFT IN THE DEMAND CURVE P 2 e2 P 1 el D2 D1
SHIFT IN THE DEMAND CURVE As a result, this demand curve need not be stable over time. Any change that increases the quantity demanded at every price shifts the demand curve to the right and is called an increase in demand. Any change that reduces the quantity demanded at every price shifts the demand curve to the left and is called a decrease in demand
VARIABLES AFFECTING SHIFT IN DEMAND CURVE oIncome: In order to understand the effect of an increase or decrease in income we first need to distinguish between normal goods and inferior goods.