Written/Composed by:- Adnan Maqbool , Contact # 0315-3130411 My Youtube Channel: Easy Conceptual Study Website: www.informationpk.com , E-mail:
[email protected] Micro Economics I.Com/D.com/FA/FSc/BA/BSc/ B.com/ BS/BBA/MBA/M.Com/ACCA Visit: www.informationpk.com for Notes, Past papers, Home Tuition and more. Page | 1 Demand i . Deman d ref ers t o th e b eh avi o r o f con su m ers. ii. Deman d is th e q u an tity o f a comm od it y actu ally b ou gh t “D eman d is th e amou n t o f a p rod u ct b u yers a r e wi llin g an d ab le to p u rch ase at a giv en p ric e o v er a p articu la r p eri od of tim e. ” So de ma n d ha s tw o co nditio ns: i . Desir e to p u rch as e ii. Pu rch asin g p o wer Th e d esi r e f or a co mmod it y i s n ot d eman d , fo r examp le, th e d esir e of a p oo r man to p u rch as e a car i s n ot d eman d b ecau se h e h as n o p o wer to p u rch as e it. D e m a n d = D e s i r e t o p u r c ha s e + A b i l i t y t o P u r c ha s e No te: - Deman d is alwa ys b as ed on wi llin gn ess an d ab ilit y to p a y f or a p r od u ct, n ot mer ely wan t o r n eed f or th e p rod u ct. www.informationpk.com
Written/Composed by:- Adnan Maqbool , Contact # 0315-3130411 My Youtube Channel: Easy Conceptual Study Website: www.informationpk.com , E-mail:
[email protected] Micro Economics I.Com/D.com/FA/FSc/BA/BSc/ B.com/ BS/BBA/MBA/M.Com/ACCA Visit: www.informationpk.com for Notes, Past papers, Home Tuition and more. Page | 2 De ma n d is a rela tio nship betw een t w o eco no mic va ria bles: - i . Pric e o f a p articu lar g ood ii. Qu an tity of th e g ood , wh ich th e con su m er s ar e wi llin g t o b u y at th at p rice d u rin g a sp ecific tim e p eri od , all oth er th in gs b ein g eq u al. Th e d eman d cu rv e h as a lwa ys ten d en c y t o mo v e f r om th e left to th e righ t. It mea n s th at d eman d cu rve h as alwa ys n egati v e s lop e. Do wn ward s lop e o f d eman d cu rve in d icates th at mor e is p u rch as ed in r esp on s e to fa ll in p rice. Rea so ns o f the neg a ti ve slo pe (1 ) La w o f d imin ish in g margin al u tilit y (2 ) In c r eas e in th e n u mb er of c o n su mers (3 ) In c om e ef f ect (4 ) Su b stitu te ef f ect (5 ) Diff er en t u ses (1 ) La w of dimini shing ma rg in a l utility Acc ord in g t o th is la w, as con su mp tion of a comm od it y in creas es, ma r gin al u tilit y o f each su ccessi v e u n it g o es on d imi n ish in g. Acc o rd in gly, fo r ever y ad d ition al u n it to b e p u rch ased , th e con su m er is wi llin g t o p a y less an d less p rice. www.informationpk.com
Written/Composed by:- Adnan Maqbool , Contact # 0315-3130411 My Youtube Channel: Easy Conceptual Study Website: www.informationpk.com , E-mail:
[email protected] Micro Economics I.Com/D.com/FA/FSc/BA/BSc/ B.com/ BS/BBA/MBA/M.Com/ACCA Visit: www.informationpk.com for Notes, Past papers, Home Tuition and more. Page | 3 (2 ) Increa se in the nu mber o f co nsu mers Con su mer start p u rch as e co mmod it y wh en its p ric e falls d o wn . In th is wa y, th e d eman d fo r th e comm od it y in creas es wh en th e n u mb e r o f con su mers in crea ses an d th en in creas e in p rice cau ses a d ec r eas e in n u mb er o f con su mers. (3 ) Inco me Ef f ect Du e to th e d ecr eas e in th e p r ice o f a comm od i t y th e rea l in com e or p u rch asin g p o wer of th e b u yers in creas es an d th ey can p u r ch ase m or e o f th e sam e comm od it y with th e sam e amou n t of m on ey. So , d eman d in creas es. In th e sam e wa y, t h e r ea l in com e o r p u rch asin g p ower, d ecr eas es wh en th e p rice o f th e comm od it y in c rea ses an d th e b u yer s can p u rch ase les s q u an tity with th e sam e am o u n t of mon ey s o d eman d d ecr eas es. (4 ) Subs tit utio n Ef f ect Wh en th e p rice of s om e co mmod it y d ec r eas es, it b ecom es ch eap er th an its s u b stitu tes, so th e p eop le wh o d o n ot p u rch ase it b ef or e, sta rt p u rch asin g it b ecau se o f its b ein g ch eap er. Th u s its d eman d in creas es. For examp le, t ea a n d coff ee a r e su b stitu tes of each oth er. If p ric e of t ea d ecr eas es, it wi ll b ec om e ch eap er th an cof f ee. It h a p p en s, p eop le will stop tak in g coff ee an d start tak in g tea. www.informationpk.com
Written/Composed by:- Adnan Maqbool , Contact # 0315-3130411 My Youtube Channel: Easy Conceptual Study Website: www.informationpk.com , E-mail:
[email protected] Micro Economics I.Com/D.com/FA/FSc/BA/BSc/ B.com/ BS/BBA/MBA/M.Com/ACCA Visit: www.informationpk.com for Notes, Past papers, Home Tuition and more. Page | 4 (5 ) Dif f erent U ses A go od ma y h av e s ev eral u s es. For examp le mi lk is u sed fo r mak in g cu rd , ch ees e an d b u tter. If p ric e o f milk r ed u ces, it wi ll b e p u t to d iff er en t u s es. Acc ord in g ly, d eman d fo r exp an d s. www.informationpk.com
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