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DEMAND-

MICROECONOMIS

Demand is an economic principle


referring to a consumer's desire and
willingness to pay a price for a
specific good or service
When supply of a product goes up,
the price of a product goes down
and demand for the product can rise
because it costs loss.
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Example
For example, a miser's desire for and his ability to
pay for a car is not demand, for he does not have
the necessary will to pay for the car. Similarly, a
poor person's desire for· and his willingness to pay
Demand for a good implies the desire of for a car is not demand because he lacks the
an individual to acquire the product. It necessary purchasing power. One can also imagine
also includes willingness and ability of ail an individual, who possesses both the will and the
individual to pay for the product. purchasing power to pay for a good. But this
purchasing power is not the demand for that good,
this is because he does not have the desire to buy
that product. Therefore, demand is successful
when there are all the three factors: desire,
willingness and ability.

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TYPES OF DEMAND

1. Individual and market demand


2. Demand for firm's protectant industry’s
products
3. 3Autonomous and derived demand
4. Demand for durable and non-durable goods
5. Short-term and long-term demand

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Factors affecting Market demand:
1. Price of the commodity
2. Price of related commodity
3. Income of a consumer
4. Taste and preference of a consumer
5. Miscellaneous
6. Population Size
7. Distribution of Income
8.

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Price Elasticity:
a measure used in economics to show the
responsiveness, or elasticity, of the quantity
demanded of a good or service to a change in
its price

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The formula for computing
elasticity of demand is:
(Q1 – Q2) / (Q1 + Q2)

Price
P1
(P1 – P2) / (P1 + P2)
P2
If the formula creates a number greater than 1, the
demand is elastic. In other words, quantity changes
faster than price. If the number is less than 1, demand
is inelastic. In other words, quantity changes
slower than price. If the number is equal to 1, elasticity
of demand is unitary. In other words, quantity
changes at the same rate as price.

Quantity Q1 Q2
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