theory of demand class 11 assignment

Theory of Demand Class 11 | Change in Demand | Chapter 5 | Class 11 |

Table of Contents

THEORY OF DEMAND CLASS 11, CHAPTER 5 | ECONOMICS

Demand refers to different possible quantities of a commodity that the consumer is ready to buy at different possible price of that commodity.

Quantity demanded – Specific quantity to be purchased against a specific price of the commodity.

Demand schedule  – It is a table showing all the quantities of a commodity that buyer is ready to buy at different prices at a point of time. It is of two types: Individual demand schedule and Market demand schedule.

• Individual demand  – It is a table showing all the quantities of a commodity and single buyer is ready to buy at different price at a point of time.
• Market demand   – It is a table showing all the quantities of a commodity that all buyers are ready to buy at different price at a point of time.

Demand Curve  – It is a diagrammatic representation showing all the quantities of a commodity that buyer is ready to buy at different price at a point of time. It is of two types: Individual demand curve and Market demand curve.

• Individual demand – It is a diagrammatic representation showing all the quantities of a commodity that a single buyer is ready to buy at different price at a point of time.

Market demand   – It is diagrammatic representation showing all the quantities of a commodity that all buyers are ready to buy at different price at a point of time.

Demand function – It shows functional relationship between demand and its determinants. It is of two types: Individual demand function and Market demand function.

• Individual demand – It shows relationship between demand by a single consumer and its various determinants.

Dx = f(Px, Pr, Y, T, E)

Px – Price of the commodity

Pr – Price of related goods

Y – Income of consumer

T – Taste and preference of consumer

E – Expectation of consumer.

• Market demand  – It shows relationship between demand by all consumer and its various determinants.

Dx = f(Px, Pr, Y, T, E, N, Yd, G)

N – Population’s size

Yd – Distribution of income

G – Government’s policy

Various Determinants

1) Price of the commodity (Px) – It is also known as law of demand. It states that other things being constant, when price of the commodity rises, the demand contracts (falls) and when price of the commodity falls, the demand extends (rises). Price of the commodity and its demand has inverse relationship.

2) Price of related goods (Pr) – It is also known as cross price effects. Goods are said to be related when change in price of one good X brings change in the demand of good Y. For example, increase in the price of tea, demand for coffee increases. Related goods are of two types:

• Substitute goods – These are the goods which can be substituted for each other. For example, Tea and coffee, increase in price of one will cause increase in demand of other.
• Complimentary goods – These are those goods which complete the demand for each other and demanded together. For example, car and petrol.

3) Income of consumer – Demand for a commodity also depends upon income of the consumer, other things being constant.

• Normal goods – These are those goods in case of which there is positive relation between income and quantity demanded. Quantity demanded increases in response to increase in consumer’s income and vice versa, other things remaining constant.

In case of normal goods, income effect is positive. When income increases, demand curve shifts rightwards and when income decreases, demand curve shifts leftwards.

• Inferior goods – There is negative or inverse relationship between income and quantity demanded. Other things remaining constant, quantity demanded decreases in response to increase in consumer’s income and vice versa. When income increases, demand curve shifts leftwards and when income decreases, demand curve shifts rightwards.

4) Taste and preference – Individual taste and preference affects demand of goods and services. Taste and preference of the consumer are influenced by advertisement, climate, change in fashion etc. Demand increases due to favourable change in taste and preference. On the other hand, demand decreases due to unfavourable change in taste and preference.

5) Expectations – If the consumer expects that the price in the future will rise then he will buy more quantity in present at the existing price and vice versa. Similarly, if the consumer expects an increase in income in the future then he will buy more quantity in present at the existing price and vice versa

6) Population size – Increase in population means increase in the number of buyers, so demand increases and demand curve shifts forward. Decrease in population means decrease in number of buyers, so demand falls and demand curve shifts backward.

7) Distribution of income – If income and wealth of the nation is equally distributed then there will be more demand for goods and unequal distribution of income causes a fall in the quantity demanded.If redistribution of income increases unequally, the demand for luxury goods is expected to rise. A fall in income of poor people may compel them to shift from normal to inferior goods.

8) Government policies – If government policies are favourable then demand of goods and services rises and demand curve shifts forward. If government policies are unfavourable then demand falls and demand curve shifts backwards.

The Law Of Demand 

The law of demand states that other things being constant, there is an inverse relationship between quantity demanded and own price of the commodity. With a rise in own price of commodity, its demand contracts and with a fall in own price of commodity, its demand extends.

Law of demand holds good when other things remain constant.

Assumptions of the law of Demand 

• The price of related goods does not change.
• No change in expectation of consumer
• No change in income of consumer
• Taste and preference of consumer remain constant.

Exception of Law of Demand 

• Giffen goods – Giffen goods are special type of inferior gods, where price effect is positive and income effect is negative, the law of demand does not apply with giffen goods,
• Veblen / conspicuous goods – The exception relates to certain prestige goods used as status symbol like luxury goods, diamonds, antiques etc. These goods are demanded by rich section of society.
• Necessity goods – The law of demand does not apply in case of necessity goods like salt, milk, food grains etc.
• Illusion of buyers – When a consumer judges irrationally that if price rises, then quality of goods will be better, he buys more. The law of demand in such case fails.
• Emergencies – The law of demand fails in case of emergencies like war, natural calamity etc.

Why does law of demand operate?

Why is slope of demand curve id downwards?

Why is there inverse relationship between price and demand?

The following factors are responsible for the operation of the law of demand:

• Law of diminishing marginal utility – As consumption of a commodity increases, marginal utility of each successive unit goes on diminishing. Accordingly, for every additional utility consumer is willing to pay less and less price.
• Income effect – It refers to change in demand when there is change in income of the consumer due to fall in price. When price of commodity falls, consumer’s real income increases, so he demands more.
• Substitution effect – It refers to substitution of one commodity foe the other when it becomes relatively cheaper.
• Change in   number of  buyers – When price falls, new consumers are attracted who can now afford to buy it and thus demand expands.
• Different uses – Goods like milk, steel, electricity etc can be put to several uses. When prices of such goods falls, its uses increases, so demand rises.

Change in Demand   

It refers to increase or decrease in demand in response to change in determinants of demand other than price of the commodity. It is basically shift in demand curve. It is classified in two types: Increase in demand and decrease in demand. It is caused due to change in determinants other than price of commodity.

Change in Quantity Demanded

It refers to extension or contraction in quantity demanded in response to rise or fall in its price, other things remain constant. It is also known as movement along a demand curve. It is classified in two types: Extension of demand and Contraction of demand. It is caused due to price factor only.

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Theory of Demand

Demand, market demand, determinants of demand, demand schedule, demand curve and its slope, movement along and shifts in the demand curve.

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Notes on the Theory of Demand | Economics

Notes on the Theory of Demand:- 1. Meaning and Definitions of Demand 2. Notes on Demand Function 3. Factors Determining Individual Demand 4. Factors Determining Market Demand 5. Demand Schedule 6. Demand Curves 7. Law of Demand 8. Movement along a Demand Curve and Shifts in the Demand Curve 9. Kinds of Demand 10. Inter-Related Demands. 

It must be remembered that demand in Economics is always stated with reference to a particular price. Any change in price will normally bring about a change in the quantity demanded. In addition to price, demand is also used in reference to a particular period of time. For Example- demand for umbrellas will not be as high in winter as during rains. The demand for any commodity or service, therefore, must be stated with reference to the price and the relevant point of time.

Notes on Demand :

We know that people have numerous wants which vary in intensity and quality. Just desiring or wanting things is not enough to create a demand. Suppose, a mill worker desires or wants to have a car but does not have the necessary means to buy it.

This desire is ineffective and will not become a demand. Similarly, a miser may desire to have the car, has means to purchase it, but will not spend the money. His desire would also not constitute a demand. Thus, we define demand for a commodity or service as an effective desire, i.e., a desire backed by means as well as willingness to pay for it.

ADVERTISEMENTS:

The demand arises out of the following three things:

i. Desire or want of the commodity.

ii. Ability to pay,

iii. Willingness to pay.

Only when all these three things are present then the consumer presents his demand in the market.

Definitions :

“Demand for a commodity is the quantity which a consumer is willing to buy at a particular price at a particular time.”

“The demand for anything, at a given price, is the amount of it which will be bought per unit of time at that price.” -PROF. BENHAM

“By demand, we mean the quantity of a commodity that will be purchased at a particular price and not merely the desire of a thing.”-HANSEN

Notes on the Demand Function :

Demand function shows the relationship between quantity demanded for a particular commodity and the factors influencing it. It can be either with respect to one consumer or to all the consumers in the market.

A consumer’s demand for a commodity is influenced by the following factors:

1. A consumer’s demand for a commodity is influenced by the price of that commodity. Usually the higher the price, the lower will be the quantity demanded.

2. A consumer’s demand for a commodity is influenced by the size of his income. In most cases, the larger the income, the greater will be the quantity demanded.

3. A consumer’s demand for a commodity is influenced by the prices of related commodities. They may be complementary or substitutes.

4. The tastes of the consumers.

In technical language, it is said that the demand for a commodity is a function of the four variables like:

q = f(P, Y, P r , T)

Where q stands for quantity demanded, P stands for the price of the commodity in question, Y stands for the income of the consumer, P r indicates prices of the related commodities and T denotes the Tastes of the consumer and f stands for function. But in practice the three of these four variables remain constant. And hence the demand function takes the form of-

Notes in the Factors Determining Individual Demand :

Demand is not dependent on price alone. There are many other factors which affect the demand of a product.

These factors are as follows:

1. Price of the Product:

Demand for a commodity depends on its price. As price rises, for a normal good, demand falls and vice-versa. However, there are exceptions, i.e., for Giffen goods, as price rises demand also rises.

2. Income of the Consumer:

A key determinant of demand is the level of income i.e., the higher the level of income the higher the demand for a given commodity. Consumer’s income and quantity demanded are generally related positively. It means that when income of the consumer rises he wants to have more units of that commodity and when his income falls he reduces the demand.

In consumer theory, an inferior good is a good that decreases in demand when consumer income rises i.e., increase in income reduces the demand because the consumer shifts his consumption to superior goods and forgoes his existing product. Thus reducing its demand.

Cheaper cars are examples of the inferior goods. Consumers will generally prefer cheaper cars when their income is constricted. As a consumer’s income increases the demand for cheap cars decreases and demand for costly cars increases.

3. Prices of Related Goods:

Consumption choices are also influenced by the alternative options available to users in the relevant market place. Market information regarding alternative products, quality, convenience and dependability all influence choices.

The two products may be related in two ways- Firstly, as complementary goods and secondly as substitute goods.

Complementary goods are those goods which are used jointly and consumed together like tennis ball and a racket, petrol and car. The relationship between the price of a product and the quantity demanded of another is inverse. For example if the price of cars were to rise, less people would choose to buy and use cars, switching perhaps to public transport-trains. It follows that under these circumstances the demand for the complementary good petrol would also decrease.

Goods which are perceived by the consumer to be alternatives to a product are termed as substitute goods. There is direct relationship between the demand for a product and the price of its substitute. Example- scooter and a motorcycle, tea and coffee.

The increase in price of tea would decrease its quantity demanded and people would switch over to its substitute commodity coffee.

4. Consumer’s Tastes and Preferences:

Demand for a product is also affected by the tastes and preferences of the consumers. As tastes and preferences shift from one commodity to the other, demand for the first commodity reduces and that of the other rises.

5. Expectation of Future Prices:

The current demand of a product also depends on its expected price in future. If future price is expected to rise, its present demand immediately increases because the consumer has a tendency to store it at low prices for his future consumption. If, however the price of a product is expected to fall then he has a tendency to postpone its consumption and as a result the present demand would also fall.

This is often the case on Budget Day, when consumers rush to fill their petrol tanks prior to an expected increase in taxation. The reverse is also true, in that an expectation that prices are about to fall, will decrease current demand, as consumers will await for the expected price reduction.

6. Economic Conditions:

The demand for commodities also depends upon prevailing business conditions in the country. For, example- during the inflationary period, more money is in circulation and people have more purchasing power. This causes an increase in demand of various goods even at higher prices. Similarly, during deflation (depression), the demand for various goods reduces in spite of lower prices because people do not have enough money to buy.

Notes on the Factors Determining Market Demand :

Market demand for a commodity means the sum total of the demand of all individuals. Market demand depends, not only on the prices of the commodity and prices of related commodities but also on the number of factors.

1. Pattern of Income Distribution:

If National income is equitably distributed, there will be more demand and vice-versa. If income distribution moves in favour of down­trodden people, then demand for such commodities, which are used by common people would increase. On the other hand, if the major part of National income is concentrated in the hands of only some rich people, the demand for luxury goods will increase.

2. Demographic Structure:

Market demand is influenced by change in size and composition of population. Increase in population leads to more demand for all types of goods and decrease in population means less demand for them. Composition of population also affects its demand. Composition refers to the number of children, adults, males, females etc., in the population.

When the composition changes, for example, when the number of females exceeds to that of the males, then there will be more demand for goods required by women folk.

3. Government Policy:

Government policy of a country can also affect the demand for a particular commodity or commodities through taxation. Reduction in the taxes and duties will allow more persons to enter a particular market and thus raising the demand for a particular product.

4. Season and Weather:

Demands for commodities also depend upon the climate of an area and weather. In cold hilly areas woolens are demanded. During summer and rainy season demand for umbrellas may rise. In winter ice is not so much demanded.

5. State of Business:

The levels of demand in a market for different goods depend upon the business condition of the country. If the country is passing through boom, the trade is active and brisk. The demand for all commodities tends to rise. But in the days of depression, when trade is dull and slow, demand tends to fall.

Demand Schedule :

The demand schedule in economics is a table of quantity demanded of a good at different price levels. Given the price level, it is easy to determine the expected quantity demanded. This demand schedule can be graphed as a continuous demand curve on a chart where the Y-axis represents price and the X-axis represents the quantity.

According to PROF. ALFRED MARSHALL, “Demand schedule is a list of prices and quantities”. In other words, a tabular statement of price-quantity relationship between two variables is known as the demand schedule.

The demand schedule in the table represents different quantities of commodities that are purchased at different prices during a certain specified period (it can be a day or a week or a month).

The demand schedule can be classified into two categories:

1. Individual demand schedule;

2. Market demand schedule.

1. Individual Demand Schedule:

It represents the demand of an individual’ for a commodity at different prices at a particular time period. The adjoining table 7.1 shows a demand schedule for oranges on 7th July, 2009.

Movement along a Demand Curve and Shifts in the Demand Curve (Diagrams):

1. Change in Quantity Demanded — Movement along a Demand Curve:

Extension and Contraction of Demand- The quantity demanded of a product does not remain constant, but keeps on changing due to various factors. If the quantity demanded changes due to change in price only, it is called expansion and contraction of demand. If price decreases, it results in expansion of demand and if price increases it results in contraction of demand. This situation is shown by movement along the same demand curve.

Theory of Demand

Theory of Demand is the principle/law that correlates the demand for a product with the price of the product. The Law of Demand is the basis for price determination in an open market. We will also look at the Elasticity of Demand and the concept of Demand Forecasting. Let us get started.

• Meaning And Determinants Of Demand
• Law Of Demand And Elasticity Of Demand
• Exceptions to the Law of Demand
• Elasticity of Demand
• Movement along the Demand Curve and Shift of the Demand Curve
• Price Elasticity of Demand
• Income Elasticity of Demand
• Cross Elasticity of Demand
• Demand Forecasting
• Methods of Demand Forecasting

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• Guide to Microeconomics

Demand Theory: Definition in Economics and Examples

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

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What Is Demand Theory?

Demand theory is an economic principle relating to the relationship between consumer demand for goods and services and their prices in the market. Demand theory forms the basis for the demand curve, which relates consumer desire to the amount of goods available. As more of a good or service is available, demand drops and so does the equilibrium price.

Demand theory highlights the role that demand plays in price formation, while supply-side theory favors the role of supply in the market.

Understanding Demand Theory

Demand is simply the quantity of a good or service that consumers are willing and able to buy at a given price in a given time period. People demand goods and services in an economy to satisfy their wants, such as food, healthcare, clothing, entertainment, shelter, etc. The demand for a product at a certain price reflects the satisfaction that an individual expects from consuming the product. This level of satisfaction is referred to as utility  and it differs from consumer to consumer. The demand for a good or service depends on two factors: (1) its utility to satisfy a want or need, and (2) the consumer’s ability to pay for the good or service. In effect, real demand is when the readiness to satisfy a want is backed up by the individual’s ability and willingness to pay.

Demand theory is one of the core theories of microeconomics . It aims to answer basic questions about how badly people want things, and how demand is impacted by income levels and satisfaction (utility). Based on the perceived utility of goods and services by consumers, companies adjust the supply available and the prices charged.

Built into demand are factors such as consumer preferences, tastes, choices, etc. Evaluating demand in an economy is, therefore, one of the most important decision-making variables that a business must analyze if it is to survive and grow in a competitive market. The market system is governed by the laws of supply and demand, which determine the prices of goods and services. When supply equals demand, prices are said to be in a state of equilibrium . When demand is higher than supply, prices increase to reflect scarcity . Conversely, when demand is lower than supply, prices fall due to the surplus .

Key Takeaways

• Demand theory describes the way that changes in the quantity of a good or service demanded by consumers affects its price in the market,
• The theory states that the higher the price of a product is, all else equal, the less of it will be demanded, inferring a downward sloping demand curve.
• Likewise, the more demand that occurs, the greater the price will be for a given supply.
• Demand theory places primacy on the demand side of the supply-demand relationship.

The Law of Demand and the Demand Curve

The law of demand introduces an inverse relationship between price and demand for a good or service. It simply states that as the price of a commodity increases, demand decreases, provided other factors remain constant. Also, as the price decreases, demand increases. This relationship can be illustrated graphically using a tool known as the demand curve.

The demand curve has a negative slope as it charts downward from left to right to reflect the inverse relationship between the price of an item and the quantity demanded over a period of time. An expansion or contraction of demand occurs as a result of the income effect or substitution effect . When the price of a commodity falls, an individual can get the same level of satisfaction for less expenditure, provided it’s a normal good . In this case, the consumer can purchase more of the goods on a given budget. This is the income effect. The substitution effect is observed when consumers switch from more costly goods to substitutes that have fallen in price. As more people buy the good with the lower price, demand increases.

Sometimes, consumers buy more or less of a good or service due to factors other than price . This is referred to as a change in demand . A change in demand refers to a shift in the demand curve to the right or left following a change in consumers’ preferences, taste, income, etc. For example, a consumer who receives an income raise at work will have more disposable income to spend on goods in the markets, regardless of whether prices fall, leading to a shift to the right of the demand curve.

The law of demand is violated when dealing with Giffen or inferior goods. Giffen goods are inferior goods that people consume more of as prices rise, and vice versa. Since a Giffen good does not have easily available substitutes, the income effect dominates the substitution effect.

Supply and Demand

The  law of supply and demand  is an economic theory that explains how supply and demand are related to each other and how that relationship affects the price of goods and services. It's a fundamental economic principle that when supply exceeds demand for a good or service, prices fall. When demand exceeds supply, prices tend to rise.

There is an inverse relationship between the  supply  and prices of goods and services when demand is unchanged. If there is an increase in supply for goods and services while demand remains the same, prices tend to fall to a lower equilibrium price and a higher  equilibrium quantity  of goods and services. If there is a decrease in supply of goods and services while demand remains the same, prices tend to rise to a higher equilibrium price and a lower quantity of goods and services.

The same inverse relationship holds for the demand of goods and services. However, when demand increases and supply remains the same, the higher demand leads to a higher equilibrium price and vice versa.

Supply and demand rise and fall until an equilibrium price is reached. For example, suppose a luxury car company sets the price of its new car model at $200,000. While the initial demand may be high, due to the company hyping and creating buzz for the car, most consumers are not willing to spend $200,000 for an auto. As a result, the sales of the new model quickly fall, creating an  oversupply and driving down demand for the car. In response, the company reduces the price of the car to $150,000 to balance the supply and the demand for the car to ultimately reach an equilibrium price.

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• Law of Demand

An Introduction to Law Demand

Demand is a vital economic concept that works both at the market level and personal level. It also includes several concepts like law of demand, factors affecting it and eventually the impact of it on the economy at large. Therefore, it is essential for students to get this concept right from the very beginning as it will help to interpret the importance of the law of demand in economics. 

However, to make things easier, learners need to delve into the core of this topic to score well. 

What is the Law of Demand in Economics?

The law of demand in economics explains that when other factors remain constant, the quantity demand and price of any product or service show an inverse equation. It also means that whenever the value of a specific product increases, demand for the same declines; the exact opposite can also be observed. From this comes a concept of a demanding schedule. 

Demand Schedule

This graphical representation shows that different quantities of product are demanded at varying prices. It thus calls for a law of demand graph to explain elaborately. 

Analysis of Law of Demand 

In order to run a business in a competitive market, it is essential to understand the law of demand definition economics. This law effectively indicates consumer choice behavior. Moreover, there is a dedicated graph that shows this relationship and helps economists to take economic measures accordingly. 

This concept is based on a natural customer choice behavior. As a matter of fact, when the price of any good or service rises, demand for the same tends to fall as the consumers will not spend extra money on something than its standard price and will look for cheaper alternatives. 

Moreover, often this question comes up in examinations like “explain law of demand with diagrams”. Therefore, it will be wiser to prepare the question beforehand to answer accurately. 

(Image will be Uploaded Soon)

The above diagram contains a law of demand curve that is always downward sloping. It clearly shows that when the price increases from p2 to p1, the necessitated quantity decreases from Q2 to Q1. 

Similarly, the law of demand in economics is an interesting chapter that also includes some related sub-topics like exceptions of this law and so on. 

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Law of demand exceptions .

In a few cases, the law of demand in economics does not follow the rule. For instance, often it happens that the demand for a particular product rises along with the price. Therefore, it is vital to know about the exceptions as well to comprehend the law better and understand real-life incidents. 

For a good of prestige, the demand almost remains the same even if the price increases. 

Similarly, for necessary commodities as well, the demand rises due to its increasing consumption, despite the price rise. 

This applies as well in the case of Giffen goods. 

These are some of the certain scenarios where the law deviates from its standard rendition. 

Thus, to learn more about the law of demand in economics, download the Vedantu App and read vital notes on this topic. Moreover, they also offer various problems on this topic so that you can get a better grip on Economics. 

Factors Affecting Demand

Several factors can influence the shape and position of the demand curve. Rising income tends to raise demand for common economic commodities since individuals are more eager to spend. The availability of close alternative items that compete with particular economic goodwill tends to reduce demand for that good since they can satisfy the same types of consumer wants and needs. Availability of closely complementary products, on the other hand, will tend to raise demand for an economic item, because combining two goods might be even more useful to consumers than utilising them individually. Other variables that vary the pattern of customer preferences for how the product may be utilized and how urgently it is needed, such as future expectations, changes in background environmental circumstances, or changes in the actual or perceived quality of a good, might shift the demand curve.

Importance of Law of Demand

Price Determination - The study of law of demand is helpful for a trader to fox up the price of a commodity. He understands how much demand will decline if the price of the commodity rises to a certain level, and how much demand will grow if the price of the commodity falls. The market demand schedule can offer information on overall market demand at various prices. It helps management in determining how much of a price rise or drop in a commodity is beneficial. 

Importance to the Farmers - Farmers' economic situation is affected by whether they have a good or bad crop. If a good crop fails to generate demand, the crop's price will drop drastically. The farmer will not benefit from a successful harvest, and vice versa.

Importance to the Government - Governments evaluate the law of demand when deciding whether or not to impose additional taxes or tariffs on products, particularly when the amount demanded is not strongly influenced by price.

Major Facts about Law of Demand

It expresses the inverse relationship between demand and price. It basically states that an increase in price will cause a decrease in the amount requested, whereas a decrease in price would cause a rise in quantity demanded. 

It simply makes a qualitative statement, indicating the direction of change in the quantity requested but not the magnitude of change. 

It does not demonstrate a proportionate link between price changes and subsequent demand changes. If a price increases by 10%, the quantity demanded may decrease in any proportion.  

The law of demand is one-sided since it only explains how price changes affect the amount required. It makes no mention of the impact of changes in demand on the price of the item.

Difference between Demand and Quantity Demanded

It is critical in economic theory to distinguish between the concept of demand and the amount demanded. The term "demand" in the chart refers to the green line that runs through A, B, and C. It expresses the link between the urgency of consumer desires and the quantity of the economic item available. A shift in demand shows that this curve's position or shape has changed; it represents a movement in the underlying pattern of consumer desires and requirements in relation to the resources available to satisfy them.

The term "quantity demanded," on the other hand, refers to a point on the horizontal axis. Variations in the quantity demanded are only due to price changes and do not indicate any shift in customer preferences. Changes in quantity demanded simply refer to movement along the demand curve as a result of a price adjustment. These two concepts are sometimes confused, but this is a common misunderstanding: prices do not reduce or raise demand; rather, they alter the amount required.

Relationship between Supply and Demand

The law of supply and demand asserts that the price of a product or service will vary depending on the amount sold by the supplier and the demand from consumers. Therefore, if a product is costly, the seller will ramp up manufacturing. However, If the price is extremely high, buyers will likely buy less of it, resulting in lower demand.

FAQs on Law of Demand

1. What are the types of Demand? 

Demand in Economics refers to the number of consumers who are willing to purchase a product or service in a given period. There are generally 7 types of demand. A) Joint Demand, B) Composite Demand, C) Long-run and Short-run Demand, D) Income Demand, E) Price Demand, F) Competitive Demand and G) Direct and Derived Demand. 

Nevertheless, irrespective of the type of demand, it is intermingled with Supply. Both demand and supply determine the price of a particular product or service available in the market. 

2. What is the relationship between Demand and Supply? 

Demand and Supply are closely connected. In simple words, when the Supply of a particular good or service exceeds the demand, the price of the same falls. On the other hand, while this demand surpasses Supply, the price rises. 

Hence, Supply and price are inversely proportional when demand remains unchanged. Several economic theories work in line with this fundamental theory. 

3. What is the Demand Curve? 

The demand for a particular product mainly depends on its price and other factors such as preferences and income of consumers, the price of other products, etc. Moreover, in Economics, except the price, other factors are considered as fixed. Therefore, a curve is drawn on the basis of quantity and price that is known as a demand curve and the law associated with it is called the law of demand curve.  

The vertical axis represents price, whereas the horizontal axis represents quantity. This curve is always downward sloping. 

4. Where can I get useful study material for various concepts of Economics?

Vedantu's website or app makes it simple for students to get all of the essential Commerce Study Material. These solutions provide you with precise, clear, and error-free answers to all of your business problems. Textbooks, Solution Papers, and Notes may all be used to help you read more fully and improve your test preparation. When students struggle to understand the foundations of economics, they frequently memorise their courses; nevertheless, in secondary school, mugging up is not an option. The best way to study for tests is to understand the fundamentals of each chapter. That is why Vedantu offers up-to-date study materials for students to help them grasp the fundamentals of each subject. These resources are accessible for free on the Vedantu app as well. Vedantu's app works on smartphones and other mobile devices.

Commerce Aspirant » Economics Class 11 » Demand Function In Economics Class 11 Notes

Demand Function In Economics Class 11 Notes

Demand function in economics class 11 notes provides a concise explanation of the concept. These notes are essential for reviewing and studying class material for better comprehension and exam preparation. Using these notes, which are effective and concise, you can save time, energy, and confusion that frequently results from attempting to make sense of unorganized, overwhelming, inadequate, or wordy notes. These notes can be very helpful when making outlines and studying.

• Demand function
• Individual demand function
• Market demand function

Demand Function in economics 

The demand function shows the relationship between the quantity demanded of a particular commodity and the factors influencing it. It can be either concerning one consumer (individual demand function) or all the consumers in the market (market demand function).

Individual Demand function

Individual demand function refers to the functional relationship between individual demand and the factor affecting individual demand.

It is expressed as

D x  =  f (P x , Pr, Y, T, F)

D x  = Demand for commodity x

P x  = Price of the given commodity x ,

P r  = Prices of Related Goods

y  = Income of the consumer

T = Tastes and Preferences

F = Expectation of change in price in the future.

Market Demand Function  

Market demand function refers to the functional relationship between market demand and the factors affecting market demand. The market demand function can be expressed as

D x  = Market demand of commodity x ,

P x  = Price of given commodity x ,

Pr = Prices of related goods;

y = Income of the consumers;

T = Tastes and Preferences,

F = Expectation of change in price in the future;

Po = Size, and composition of population;

S = Season and weather;

D = Distribution of Income.

Demand function in economics class 11 notes Not only do characteristics of demand class 11 notes save students’ energy and time during the exam, but they also make it easier to recall information in a shorter amount of time. Not only do the study notes help students remember important information, but they also make it easier for them to write quickly on the exam if they come prepared by reading them.

Unit 5: Consumer’s Equilibrium and Demand

• Concept of Utility in Economics
• Measurement of Utility in Economics
• Total Utility and Marginal Utility
• Law of Diminishing Marginal Utility
• Conditions of Consumer’s Equilibrium
• Theory of Demand
• What is Demand in Economics
• Demand Characteristics
• Determinants of demand
• Determinants of Market Demand
• Demand Function In Economics
• Demand Schedule | Individual demand schedule | Market demand schedule
• Economics Class 11 Notes
• Accountancy Class 11 Notes
• Economics Class 11 MCQs

Business Studies Class 11 MCQ

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Class 11 Notes

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Class 12 Notes

• Economics Class 12 Notes
• Business Studies Class 12 Notes
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Class 12 MCQs

• Economics Class 12 MCQs
• Business Studies Class 12 MCQs
• Accountancy Class 12 MCQs

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