Meaning of demandIn economics , demand is an principle that describes a consumer’s desire , willingness and ability to pay a price for specific good or service.In other words , with fall in price demand function shows rise and rise in price demand falls . This relation in demand and price in known as “LAW OF DEMAND”

LAW OF DEMAND

It explains the relationship b/w change in quantity demanded & change in price. It states that higher the price,lower would be demand in market and vice-versa

The amount demanded increases with a fall in price and diminishes with a rise in price.

ACCORDING TO “MARSHALL”

It simply indicates the direction of change in demand as a result of change in price.The law is explained with the help of following demand:

a. Individual demand scheduleb. Market demand schedule

EXPLANATION OF LAW OF DEMAND

It defines as table in which shows quantities of a given commodity which as individual consumer will buy at all possible prices at a given time.

INDIVIDUAL DEMAND SCHEDULE

Price per unit(in rs.)

Quantity demands (in units)

1 4

2 3

3 2

4 1

It define as quantities of a given commodity which all consumers will buy at all possible price at given moment af time. As here A and B are two consumers of X commodity.

MARKET DEMAND SCHEDULE

Price of commodity x

Demand of A Demand of B Market demand

1 4 5 4+5=9

2 3 4 3+4=7

3 2 3 2+3=5

4 1 2 1+2=3

1. Income level should remain constant 2. Taste of buyer should not change 3. Price of other goods should remain same 4. No new substitutes for the commodity 5. Price rise in future should not be expected 6. Advertising expenditure should remain same.

ASSUMPTIONS OF LAW OF DEMAND

1. Price of commodity2. Income of consumer3. Taste and preference4. Prices of related goods5. Advertisements6. Consumer expectations7. Growth of population8. Weather condition

DETERMINANTS AND FUNCTIONS OF DEMAND

9. Tax rate10. Availability of credit11. Pattern of saving12. Circulation of money

a) Conspicuous goodsb) Necessities of lifec) Giffen’s goodsd) Future expectations about pricese) Impulsive purchasesf) Ignorance effects

EXCEPTION TO LAW OF DEMAND

Sales forecasting Pricing decision Marketing decision Production decisions Financial decisions

APPLICATIONS