1. Demand Theory Chapter 3

2. Contents Definition, Representation and Meaning of Demand Tables, graphs and equations Interpretation of equations (Section 3.2) Consumer Theory (Section 3.3) Factors determining demand Elasticity..

3. Definition Quantities that people are or would be willing to buy at different prices during a given time period, assuming other factors affecting these remain the same(ceteris paribus).. Demand denotes relationship between price and quantity demanded(QD)..

4. Demand Schedule Price of cokeQuantity sold 30120 40100 5080 60 7040

5. Demand Curve Quantity demanded PRICEPRICE

6. Law of demand As price of a commodity increases the quantity demand decreases and vice versa Exceptions: – Giffins goods: related to income – Luxury goods: related to conspiciuos consumption and leisure etc.. – Speculation – Calamity and contingencies – Alcohol and drugs..

7. Demand Function Arithmetic depiction of relationship between two or more variables QD=a-bP – QD:quantity demanded – a: maximum quantity bought at no price or zero price – b: number of times QD decreases due to increase in Price – P: Price of commodity

8. Demand Equation Q= 180-2P When Price is 30 what is the QD Find the QD at price 10, 20 Maximum QD Maximum possible price….

9. Factors affecting demand Controllable: marketing mix variables… -Price, product(primary product), promotion, place(distribution strategy) Uncontrollable: external or environmental variables -Income, tastes and preferences, competitive factors, government policy, demographic factors, seasonal factors, prices of substitutes and complementary goods…

10. Impact of Change Change in Demand: – due to change in factors other than price – Impact: shift in demand curve Change in Quantity Demanded – Due to change in price – Impact: movement along demand curve

11. How much is the impact of change Introduction to the Elasticity…