Download Demand Schedule

MANAGERIAL ECONOMICS
-R.L. VARSHNEY
K.L. MAHESHWARI
-DR. D. M. MITHANI
- M.GIRIJA
R. MEENAKHI
Demand Analysis &
Business Forecasting
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Demand Function:– Factors Influencing Demands
Determinants of demand
Demand Analysis for various products, situations
and market structures :– Durable and non-durable goods
– Long run and Short run demand
– Autonomous and derived demand
– Industry and firm demand
Elasticities & demand levels
Demand Analysis
 Demand
Function
 Demand determinants
 Law of Demand
 Demand Schedule
 Demand Curve
 Demand Equation
 Factors affecting Demand
Demand Function
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Demand for a product is the amount of it that
will be bought per unit of time at a particular
price.
Individual Demand -The quantity demanded
by an individual purchaser at a given price
Market Demand -Total quantity demanded by
all the purchasers together at a given price
Demand Function- Mathematical term
expresses the functional relationship between
demand for the product and its various
determining variables
Demand Function
Dx = f ( Px, Ps, Pc, yd, T, A, N , u )
Here we assume commodity X, so
Dx = Amount demanded for the commodity X
Px = Price of X
Ps = Price of substitutes of good X
Pc = Price of complimentary goods of X
Yd = Level of disposable Income of buyers
T = Change in buyer’s Taste & Preferences
A = Advertisement expenditure
N = Number of Buyers
u = other unspecified determinant
Demand Schedule
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Demand for a product is the function of its own
price, keeping all other factors constant
Dx = f ( Px)
Demand Schedule-A Tabular statement of price
quantity relationship
It shows the inverse relationship between price
and quantity demanded
Two types of demand schedule:
– Individual Demand Schedule
– Market Demand Schedule
Individual Demand Schedule
•Table showing the various quantity purchased by
an individual purchaser at alternative price over a
given time period (day, week, month or year)
It shows the variation in demand at various prices.
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Price
Qty Demanded
4
4
3
8
2
12
1
16
Market Demand Schedule
•Table narrating the quantities of a commodity
purchased in aggregate by all the purchasers in the
market at different prices over a given period of time
It shows the total market demand at various prices.
It serve as the basis for knowing the revenue
consequences of alternative output and pricing policies
of the firm
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Price
4
A
1
B
1
C
3
Mkt. Demand
5
3
2
1
2
3
5
3
5
9
5
7
10
10
15
24
Demand Equation
A linear Demand function
Dx = A – B(Px)
Dx = Amount demanded for the commodity X
Px = Price of X
A = constant parameter signify initial demand
irrespective of price
B = implies negative relation between price and
quantity demanded
Eg. D = 20-2p
At p = 5, quantity demanded will be 20-2x5=10
Demand Curve
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Graphical presentation of a demand schedule
It relates the amount the consumer is willing to buy at
each alternative price over a period of time.
It has a negative slope
It slopes downwards from left to right representing an
inverse relation between price and demand
Price
Determinants Of Demand
 Factor
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affecting Individual Demand
Price of commodity
Income of customer
Taste, habit and Preference of Customer
Relative price of Substitute and Complementary
goods
Customer expectation
Advertisement Effect
Determinants Of Demand
 Factor
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affecting Market Demand
Price of commodity
Distribution of Income & Wealth of Community
Community common habits & scale of
Preference
General Standard of living & Spending habits of
people
Number of buyers in market & Growth population
Age, Structure, sex ratio of population
Determinants Of Demand
 Factor
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affecting Market Demand
Future expectation about Price
Level of taxation and tax structure
Inventions and innovations
Fashions
Climate and weather conditions
Advertisement and sales promotions
Customs
Law of Demand
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It expresses the nature of functional relationship
between two variables of demand relation i.e.
Price and quantity demanded
Ceteris paribus, the higher the price of the
commodity, the smaller is the quantity
demanded and lower the price, larger is the
quantity demanded.
The demand for the commodity extends as the
price falls, and contracts as the price rises.
Chief characteristics of
Law of Demand
Inverse relationship
 Price an independent variable, and
demand a dependent variable
 Assumption of other things remaining the
same
 Reasons underlying the law of demand
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Income Effect
Substitution Effect
Exception to the law of demand
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Veblen Effect / Conspicuous consumption
Giffen Goods
Speculation
Types of Demand
1.
2.
3.
4.
5.
Producers’ Goods
Durable Goods
Derived Demand
Short run Demand
Firm Demand
1.
2.
3.
4.
5.
Consumers’ Goods
Non Durable Goods
Autonomous Demand
Long run Demand
Industry Demand
Demand Distinctions
Consumers’ Goods
Producers’ Goods
1.
2.
3.
4.
5.
6.
Used for the production
of other goods
Demand is derived
Depends on marginal
productivity
Classified into
consumable and
durable
Motivated by buyer’s
income
Example: cloth, food .
house
1.
2.
3.
4.
5.
6.
Used for the direct
consumption
Demand is direct and
autonomous
Depends on marginal utility
Classified into non durable
and durable
Motivated by business
profits
Example: machines,
equipment, raw
materials,building
Demand Distinctions
Durable Goods
Non Durable Goods
1.
2.
3.
4.
5.
6.
7.
Used for the current
demand of goods
Can not be stored for a
long time
Give one time service
Demand is immediate
Demand is more elastic
in short run
Influenced by income
and convenience
Example: vegetable,
fish . house
1.
2.
3.
4.
5.
6.
7.
Used for adding stock of
existing goods
Can be stored for a long
time
Give repeated services
Demand is postponable
Demand is less elastic in
short run
Influenced by lifetime of
product and obsolescence
Example: furniture, cycle,
house
Demand Distinctions
Derived Demand
1.
2.
3.
4.
5.
6.
1.
Demand is tied to
purchase of parent good
Less price elastic
2.
Facilitate demand
3.
forecasting
4.
Demand for all
producers’ goods
Influenced by demand of 5.
parent good
Example: cement, petrol 6.
,ink, antenna, sugar
Autonomous Demand
Demand is based on the
urge of satisfy some wants
directly
more price elastic
Facilitate demand analysis
Demand for all consumers’
goods
Influenced by taste, trends
and preference
Example: building, car,
pen, television, tea
Demand Distinctions
Long run Demand
Short run Demand
1.
2.
3.
4.
5.
6.
demand of goods in a
period of one year or
less
No threat of substitute
and competitors
Demand is immediate
Demand is less elastic
in short run
Influenced by price and
income
Example: raw material,
bidi
1.
2.
3.
4.
5.
6.
demand of goods in a
period of one year to ten
year
Big threat of substitute and
competitors
Demand is permanent
Demand is more elastic in
long run
Influenced by promotion,
product change
Example: building,
cigarette
Demand Distinctions
Industry Demand
Firm Demand
1.
2.
3.
4.
5.
6.
7.
Market demand for the
commodity produced by a
particular firm
Represent the relation of the
price of the product to the
quantity bought from a single
firm
Demand is general and can not
be classified.
Demand is more elastic in short
run
Influenced by industry demand
schedule
Example: total production of
Ambuja cement : 30 cr tons
Demand os steel produced by
TISCO
1.
2.
3.
4.
5.
6.
7.
Total demand for the commodity
produced by a particular industry
Represent the relation of the price of
the product to the quantity bought
from all the firms
Demand can be classified customer
group-wise, like, steel demand for
construction and manufacture,
airline tickets for business and
pleasure
Demand is less elastic in short run
Influenced by market structure like
monopoly or oligopoly
Example: total production of cement
: 100 cr tons
total production of steel industry
Elasticity of Demand
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Change in quantity demanded due to change
in price of the commodity
Def: the elasticity of demand in the market is
great or small according as the demanded
increases much or little for a given fall in price
and diminishes much or little for a given rise in
price.
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Types of elasticities
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Price Elasticity of Demand
Income Elasticity of Demand
Cross Elasticity of Demand
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