Demand and Supply Analysis

1399 WordsDec 2, 20116 Pages
Demand and Supply Analysis 1. Demand indicates how much of a good consumers are willing and able to buy at each possible price during a given time period, other things constant. 2. The process to satisfy human wants/ needs/desires. * Want: having a strong desire for something * Need: lack of means of subsistence * Desire: an aspiration to acquire something 3. Demand: effective desire 4. Demand is that desire which backed by willingness and ability to buy a particular commodity. 5. Amount of the commodity which consumers are willing to buy per unit of time, at that price. 6. Things necessary for demand: * Time * Price of the commodity * Amount (or quantity) of the commodity consumers are…show more content…
Final and Intermediate Demands 7. Individual and Market Demands 8. Total Market and Segmented Market Demands 9. Short-term and Long-term Demand 10. Complementary and Competing Demand Determinants of demand: 1. Price of the product * Single most important determinant * Negative effect on demand * Higher the price-lower the demand 2. Income of the consumer * Normal goods: demand increases with increase in consumer’s income * Inferior goods: demand falls as income rises 3. Price of related goods * Substitutes * If the price of a commodity increases, demand for its substitute rises. * Complements * If the price of a commodity increases, quantity demanded of its complement falls. Law of demand may not operate due to the following reasons: 1. Giffen Goods 2. Snob Appeal (Veblen effect) 3. Bandwagon effect (Demonstration effect) 4. Future Expectation of Prices (Panic buying) * Addiction * Neutral goods * Life saving drugs * Salt Demand curve focuses on the relationship between the price of a good and the quantity demanded when other factors that could affect demand remain unchanged * Money income of consumers * Prices of related goods * Consumer expectations * Number and composition of consumers in the market * Consumer tastes Suppose income increases: some consumers will now be able to buy more pizza
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