1. Demand Analysis
By:Mithilesh Trivedi

2. Demand


2/28/2014
The amount consumers
desire to purchase at
various prices
Demand does not
necessarily mean a
consumer WILL buy,
but refers to a good or
service they WOULD
LIKE to buy

3. Effective Demand

Consumers must be willing to buy AND be capable of
paying the price set by the supplier
2/28/2014

4. Law of Demand
If Price rises – Quantity demanded falls
P
Q
If Price falls – Quantity demanded rises
P
2/28/2014
Q

5. Individual Demand

Individual Demand Schedule
Lists the different quantities of a good that an
individual consumer is prepared to buy at each
price
2/28/2014

6. Market Demand

Market Demand Schedule
Lists the different quantities of a good that all
consumers in the market are prepared to buy
at each price. It is derived by adding together
all the individual demand schedules for the
good
2/28/2014

7. Demand Schedule
(Demand for The Wii Games monthly)
(1)
Price
(3)
David’s
demand
(4)
Total market
demand
(# games)
(per game)
(2)
Chris’s
demand
(# games)
(# games)
A
28
16
700
B
40
15
11
500
C
60
5
9
350
D
80
1
7
200
E
2/28/2014
20
100
0
6
100

8. Demand Curve

At higher prices, consumers generally willing to purchase
less than at lower prices

Demand curve is said to have a negative slope - downward
sloping from left to right
2/28/2014

9. Point
100
Price per game
€ 20
A
Market Demand
700 games
Price (per game)
80
60
40
Demand
A
20
0
0
2/28/2014
100
200
300
400
500
Quantity (games)
600
700
800

10. Point
100
Price per game
Market Demand
A
€20
700 games
B
€40
500 games
Price ( per game)
80
60
B
40
A
20
0
0
2/28/2014
100
200
300
400
500
Quantity (games)
600
700
800

11. Point
100
Price per game
Market Demand
A
Price ( per game)
700 games
B
€40
500 games
C
80
€20
€60
350 games
C
60
B
40
20
A
0
0
2/28/2014
100
200
300
400
500
Quantity (games)
600
700
800

12. Point
100
Price per game
Market Demand
A
Price ( per game)
500 games
€60
350 games
D
60
€40
C
D
700 games
B
80
€20
€80
200 games
C
B
40
A
20
0
0
2/28/2014
100
200
300
400
500
Quantity (games)
600
700
800

13. Point
E
100
Price per game
Market Demand
€40
500 games
€60
350 games
D
€80
200 games
E
60
700 games
C
D
80
€20
B
Price ( per game)
A
€100
100 games
C
B
40
A
20
0
0
2/28/2014
100
200
300
400
500
Quantity (games)
600
700
800

14. An Increase in Demand
Price
P
Dx
2/28/2014
Qx
Q1
Quantity
D1

15. A Decrease in demand
Price
P
D1
2/28/2014
Qx
Q1
Quantity
Dx

16. Factors affecting the demand for a good
The Demand Function
Dx = f ( Px, Pc, Ps, Y, t, E)
2/28/2014

17. The Demand Function

Dx = f ( Px, Pc, Ps, Y, t, E)
Px = Goods which obey and do not obey the
Demand
 Pc = Price of Complimentary Goods
 Ps = Cost of Substitute Goods
 Y = Income
 t = Tastes
 E = Consumers Expectation

2/28/2014
Law of

18. Demand for a good depends on its own price
If price rises quantity falls
If price falls quantity rises
P2
P1
Q2
2/28/2014
Q1
Quantity Demanded

19. Demand for a good depends on its own price
• Complimentary Goods
Goods which are used
jointly. The use of one
involves the use of the other
• Substitute Goods
Goods which satisfy the
same needs and thus can be
considered as alternatives to
each other
2/28/2014

20. Complimentary Goods
D1
D2
An increase in price of a
complementary good causes the
demand for good X to fall
2/28/2014
D2
D1
An fall in price of a complementary
good causes the demand for good X to
rise

21. Substitute Goods
(The Substitute Effect)
D2
D1
An increase in price of a substitute
good causes the demand for good X to
rise
2/28/2014
D1
D2
An fall in price of a substitute good
causes the demand for good X to fall

22. Demand for a good depends on level of
income (The Income Effect)
• Normal Goods
A normal good is a good with a positive income effect. A rise in income causes
more of it to be demanded, while a fall in income causes less of it to be
demanded
2/28/2014

23. Normal Goods
D2
D1
A rise in income causes the demand for
a normal good to increase from D1 to
D2
2/28/2014
D1
D2
An fall in income causes the demand
for a normal good to fall from D1 to
D2

24. Demand Depends on Taste

If the movement in taste is in favour of the good, it causes
an increase in demand, which shifts the demand curve to the
right

If the movement in taste is against the good, it causes a fall
in demand, which shifts the demand curve to the left
2/28/2014

25. Movement in Taste
D2
D1
A movement in taste in favour of a good
causes demand to increase
2/28/2014
D1
D2
A movement in taste against a good
causes demand to fall

26. Demand for a good depends on the
expectations of consumers

Demand for a good will shift to the right if consumers
expect:
1.
2.
3.

The price of good X to be higher in the future
A scarcity of good X in the future
Their incomes to be higher in the future
Demand for a good will shift to the left if consumers
expect:
The price of good X to be lower in the future
2.
A plentiful supply of good X in the future
3.
2/28/2014Their incomes will be lower in the future
1.

27. Consumer Expectations
D2
D1
Demand for Good X will rise if
consumers expect higher future price,
scarcity or higher future incomes
2/28/2014
D1
D2
Demand for Good X will fall if
consumers expect lower future price,
abundance or lower future incomes