1. SNS COLLEGE OF TECHNOLOGY Coimbatore - 35
GE105 Engineering Economics & Cost Analysis
UNIT 2 - DEMAND & SCHEDULE
2/23/2019
SNS COLLEGE OF TECHNOLOGY / EEE / GE105 ENGINEERING ECONOMICS & COST ANALYSIS

2. Objective
The main objective of this course is to make the Engineering student know about the basic law of economics, how to organize a business, the financial aspects related to business, different methods of appraisal of projects and pricing techniques.
SNS COLLEGE OF TECHNOLOGY / EEE / GE105 ENGINEERING ECONOMICS & COST ANALYSIS
2/23/2019

3. Demand
In ordinary speech, the word demand is used rather loosely, and it is often confused with desire.
Desire is the wish to have something
But demand implies more than mere desire.
It means that the person is willing and able to pay for object he desires.
Demand thus means desire backed by willingness and ability to pay.
Both willingness and ability to pay are essential. If a man is willing to pay but he is unable to pay, his desire will not become demand.
SNS COLLEGE OF TECHNOLOGY / EEE / GE105 ENGINEERING ECONOMICS & COST ANALYSIS
2/23/2019

4. Demand
In order to change desire into demand, it is essential that he should be both willing and able to pay.
Besides, demand also signifies a price and a period of time in which demand is to be fulfilled
E.g.: Flight travel during vacations
SNS COLLEGE OF TECHNOLOGY / EEE / GE105 ENGINEERING ECONOMICS & COST ANALYSIS
2/23/2019

5. Demand
It is obvious that a person’s demand for anything varies with the price at which it is offered. He buys more of it at a lower price, and less of it at a higher price.
Similarly, his demand varies with the period of time.
Definition – Demand
“By demand we mean the various quantities of a given commodity or service which consumers would buy in one market in given period of time at various prices, or at various incomes, or at various prices of related goods.”
SNS COLLEGE OF TECHNOLOGY / EEE / GE105 ENGINEERING ECONOMICS & COST ANALYSIS
2/23/2019

6. Kinds of Demand Three kinds of demand may be distinguished:
(a) Price Demand;
(b) Income Demand; and
(c) Cross Demand
Price Demand
This demand refers to the various quantities of a commodity or service that a consumer would purchase at a given time in a market at various hypothetical prices.
SNS COLLEGE OF TECHNOLOGY / EEE / GE105 ENGINEERING ECONOMICS & COST ANALYSIS
2/23/2019

7. Kinds of Demand Income Demand
The income demand refers to the various quantities of goods and services which would be purchased by the consumer at various levels of income.
Desires of the customers do not change
The income demand brings out the relationship between income and quantities demanded.
Cross Demand
Cross Demand means the quantities of a good or services which will be purchased with reference to changes in the price not of the good but of other related goods.
These goods are either substitutes or complementary goods.
2/23/2019
SNS COLLEGE OF TECHNOLOGY / EEE / GE105 ENGINEERING ECONOMICS & COST ANALYSIS

8. Income Demand
2/23/2019
SNS COLLEGE OF TECHNOLOGY / EEE / GE105 ENGINEERING ECONOMICS & COST ANALYSIS

9. Cross Demand
2/23/2019
SNS COLLEGE OF TECHNOLOGY / EEE / GE105 ENGINEERING ECONOMICS & COST ANALYSIS

10. Demand Schedule
If we write down the different quantities that an individual or a group of individuals would buy at different prices, we get that individual’s or that group’s demand schedule.
Thus, a demand schedule is a table or a chart which shows the quantities of a commodity demanded at different prices in a given period of time.
Individual schedule is hypothetical
Market Schedule
Demanded at different prices in a market by the whole body or consumers.
Markets schedule is even more hypothetical.
2/23/2019
SNS COLLEGE OF TECHNOLOGY / EEE / GE105 ENGINEERING ECONOMICS & COST ANALYSIS

11. Uses of Demand Schedule
Intelligent forecast of the quantity
Monopolists (Individual that seeks to own a large portion) sometimes deliberately lower prices to stimulate demand. Businessmen would like to know the various quantities that are likely to be demanded at different prices. This would help them to forecast profits and to arrange production.
To find out different rates on taxes (Finance Minister)
Law of Demand
The law of demand states that other factors being constant, price and quantity demand of any good and service are inversely related to each other. When the price of a product increases, the demand for the same product will fall.
2/23/2019
SNS COLLEGE OF TECHNOLOGY / EEE / GE105 ENGINEERING ECONOMICS & COST ANALYSIS

12. Elasticity of Demand
This quantity of demand by virtue of which it changes (increases or decreases) when price changes (decreases or increases) is called Elasticity of Demand.
The demand is elastic when with a small change in price there is a great change in demand; it is inelastic or less elastic when even a big change in price induces only a slight change in demand.
Cross
Income
Price
SNS COLLEGE OF TECHNOLOGY / EEE / GE105 ENGINEERING ECONOMICS & COST ANALYSIS
2/23/2019