Demand Function
A demand function [Dn], states the relationship between the demand for a product and its various determinants.
Dn = f (Pn, Pr, I, T, E H,G)
Where
Dn = demand for a particular commodity ‘n’
f = functional relation between the demand for commodity ‘n’ and the the factors affecting this demand
Pn = Price of the commodity
Pr = Price of all related commodity
I = Income
T = The Taste of consumer
E = Future expectations
H = size of the Population
G = Government’s policy
Define
- Price Demand:
- Income Demand :
- Cross Demand :
- Statement of the law
- Assumptions :
- There should be no change in the income of the consumer.
- Prices of the related commodity should remain unchanged.
- The commodity should be a normal commodity.
- The distribution of income should not change.
- There should be no change in the taste and preferences of the consumers.
- The size of the population should not change.
|
Price ( Rs./Kg ) |
Quantity Demanded (Kg /Week) |
|
100 |
1 |
|
90 |
2 |
|
80 |
4 |
|
70 |
6 |
2. Market Demand Schedule :
Market demand
schedule is a table which shows different quantities of a commodity that all the consumers are willing to purchase at different prices during a particular
period of time.
It is
composed of the demand schedules of all individuals purchasing that commodity.
It can be obtained by adding up the quantities
purchased at different prices by all the
households in the market.
Market Demand Schedule
|
Prices (Rs /Kg) |
Quantity Demanded by ‘A’(Kg /week) |
Quantity Demanded by ‘B’(Kg /week) |
Total Market Demand (A+B) (Kg/week) |
|
100 |
1 |
2 |
3 |
|
90 |
2 |
3 |
5 |
|
80 |
4 |
5 |
9 |
|
70 |
6 |
7 |
13 |
Demand schedule is a convenient way to illustrate the law of
demand .
Both the individual demand schedule and market demand
schedule indicate that the quantity demanded of a commodity increases when its
price falls and decreases when its price rises.
Demand Curve
Demand.
A demand Schedule is converted into a demand curve, when we
plot various Price – Quantity
combination graphically.
Thus the graphical presentation of demand schedule is a
demand curve.
Definition :
The curve showing
different quantities of a commodity demanded at different alternative prices during a particular period
of time.
Types of Demand Curve
There are 2 types of demand curves –
1. Individual Demand Curve
2. Market Demand Curve
A demand curve is a convenient way of showing the
relationship between the price and the quantity demanded of a commodity.
A single point on the demand curve shows a single Price –
Quantity relation.
The whole demand curve shows the complete relationship
between the price and quantity demanded.
The demand curve is drawn on the assumption that all the
other things remain constant or unchanged , means on the assumption of ceteris
paribus order. (Ceteris Paribus order means all the other things
remains constant).
1.Individual Demand Curve :
commodity which a single consumer is willing to buy at different price during a
particular period of time.
Individual Demand Schedule of Apples:
|
Prices (Rs /Kg) |
Quantity demanded (Kg/week) |
|
100 |
1 |
|
90 |
2 |
|
80 |
4 |
|
70 |
6 |
Individual Demand Curve of Apples :
Individual Demand Curve
|
Prices |
Quantity Demanded by ‘A’ (Kg/week) |
Quantity Demanded by ‘B’ (Kg/week) |
Market Demand(Total) (A+B)Kg/week |
|
100 |
1 |
2 |
3 |
|
90 |
2 |
3 |
5 |
|
80 |
4 |
5 |
9 |
|
70 |
6 |
7 |
13 |
Market Demand Curve for Apples