1. -R.L. VARSHNEY K.L. MAHESHWARI DR. D. M. MITHANI M.GIRIJA R. MEENAKHI
MANAGERIAL ECONOMICS
-R.L. VARSHNEY
K.L. MAHESHWARI
DR. D. M. MITHANI
M.GIRIJA
R. MEENAKHI

2. Demand Analysis & Business Forecasting
Demand Function:-
Factors Influencing Demands
Determinants of demand
Demand Analysis for various products, situations and market structures :-
Durable and non-durable goods
Long run and Short run demand
Autonomous and derived demand
Industry and firm demand
Elasticities & demand levels

3. Demand Analysis Demand Function Demand determinants Law of Demand
Demand Schedule
Demand Curve
Demand Equation
Factors affecting Demand

4. Demand Function
Demand for a product is the amount of it that will be bought per unit of time at a particular price.
Individual Demand -The quantity demanded by an individual purchaser at a given price
Market Demand -Total quantity demanded by all the purchasers together at a given price
Demand Function- Mathematical term expresses the functional relationship between demand for the product and its various determining variables

5. Demand Function Dx = f ( Px, Ps, Pc, yd, T, A, N , u )
Here we assume commodity X, so
Dx = Amount demanded for the commodity X
Px = Price of X
Ps = Price of substitutes of good X
Pc = Price of complimentary goods of X
Yd = Level of disposable Income of buyers
T = Change in buyer’s Taste & Preferences
A = Advertisement expenditure
N = Number of Buyers
u = other unspecified determinant

6. Demand Schedule
Demand for a product is the function of its own price, keeping all other factors constant
Dx = f ( Px)
Demand Schedule-A Tabular statement of price quantity relationship
It shows the inverse relationship between price and quantity demanded
Two types of demand schedule:
Individual Demand Schedule
Market Demand Schedule

7. Individual Demand Schedule
Table showing the various quantity purchased by an individual purchaser at alternative price over a given time period (day, week, month or year)
It shows the variation in demand at various prices.
Price
Qty Demanded 4 3 8 2 12 1 16

8. Market Demand Schedule
Table narrating the quantities of a commodity purchased in aggregate by all the purchasers in the market at different prices over a given period of time
It shows the total market demand at various prices.
It serve as the basis for knowing the revenue consequences of alternative output and pricing policies of the firm
Price A B C
Mkt. Demand 4 1 3 5 2 10 7 15 9 24

9. Demand Equation A linear Demand function Dx = A – B(Px)
Dx = Amount demanded for the commodity X
Px = Price of X
A = constant parameter signify initial demand irrespective of price
B = implies negative relation between price and quantity demanded
Eg. D = 20-2p
At p = 5, quantity demanded will be 20-2x5=10

10. Demand Curve Graphical presentation of a demand schedule
It relates the amount the consumer is willing to buy at each alternative price over a period of time.
It has a negative slope
It slopes downwards from left to right representing an inverse relation between price and demand
Price

11. Determinants Of Demand
Factor affecting Individual Demand
Price of commodity
Income of customer
Taste, habit and Preference of Customer
Relative price of Substitute and Complementary goods
Customer expectation
Advertisement Effect

12. Determinants Of Demand
Factor affecting Market Demand
Price of commodity
Distribution of Income & Wealth of Community
Community common habits & scale of Preference
General Standard of living & Spending habits of people
Number of buyers in market & Growth population
Age, Structure, sex ratio of population

13. Determinants Of Demand
Factor affecting Market Demand
Future expectation about Price
Level of taxation and tax structure
Inventions and innovations
Fashions
Climate and weather conditions
Advertisement and sales promotions
Customs

14. Law of Demand
It expresses the nature of functional relationship between two variables of demand relation i.e. Price and quantity demanded
Ceteris paribus, the higher the price of the commodity, the smaller is the quantity
demanded and lower the price, larger is the quantity demanded.
The demand for the commodity extends as the price falls, and contracts as the price rises.

15. Chief characteristics of Law of Demand
Inverse relationship
Price an independent variable, and demand a dependent variable
Assumption of other things remaining the same
Reasons underlying the law of demand
Income Effect
Substitution Effect
Exception to the law of demand
Veblen Effect / Conspicuous consumption
Giffen Goods
Speculation

16. Types of Demand Consumers’ Goods Producers’ Goods Non Durable Goods
Autonomous Demand
Long run Demand
Industry Demand
Producers’ Goods
Durable Goods
Derived Demand
Short run Demand
Firm Demand

17. Demand Distinctions Used for the direct consumption
Consumers’ Goods
Used for the direct consumption
Demand is direct and autonomous
Depends on marginal utility
Classified into non durable and durable
Motivated by business profits
Example: machines, equipment, raw materials,building
Producers’ Goods
Used for the production of other goods
Demand is derived
Depends on marginal productivity
Classified into consumable and durable
Motivated by buyer’s income
Example: cloth, food . house

18. Demand Distinctions Used for adding stock of existing goods
Durable Goods
Used for adding stock of existing goods
Can be stored for a long time
Give repeated services
Demand is postponable
Demand is less elastic in short run
Influenced by lifetime of product and obsolescence
Example: furniture, cycle, house
Non Durable Goods
Used for the current demand of goods
Can not be stored for a long time
Give one time service
Demand is immediate
Demand is more elastic in short run
Influenced by income and convenience
Example: vegetable, fish . house

19. Demand Distinctions
Autonomous Demand
Demand is based on the urge of satisfy some wants directly
more price elastic
Facilitate demand analysis
Demand for all consumers’ goods
Influenced by taste, trends and preference
Example: building, car, pen, television, tea
Derived Demand
Demand is tied to purchase of parent good
Less price elastic
Facilitate demand forecasting
Demand for all producers’ goods
Influenced by demand of parent good
Example: cement, petrol ,ink, antenna, sugar

20. Demand Distinctions
Long run Demand
demand of goods in a period of one year to ten year
Big threat of substitute and competitors
Demand is permanent
Demand is more elastic in long run
Influenced by promotion, product change
Example: building, cigarette
Short run Demand
demand of goods in a period of one year or less
No threat of substitute and competitors
Demand is immediate
Demand is less elastic in short run
Influenced by price and income
Example: raw material, bidi

21. Demand Distinctions
Industry Demand
Total demand for the commodity produced by a particular industry
Represent the relation of the price of the product to the quantity bought from all the firms
Demand can be classified customer group-wise, like, steel demand for construction and manufacture, airline tickets for business and pleasure
Demand is less elastic in short run
Influenced by market structure like monopoly or oligopoly
Example: total production of cement : 100 cr tons
total production of steel industry
Firm Demand
Market demand for the commodity produced by a particular firm
Represent the relation of the price of the product to the quantity bought from a single firm
Demand is general and can not be classified.
Demand is more elastic in short run
Influenced by industry demand schedule
Example: total production of Ambuja cement : 30 cr tons
Demand os steel produced by TISCO

22. Elasticity of Demand Types of elasticities
Change in quantity demanded due to change in price of the commodity
Def: the elasticity of demand in the market is great or small according as the demanded increases much or little for a given fall in price and diminishes much or little for a given rise in price.
Types of elasticities
Price Elasticity of Demand
Income Elasticity of Demand
Cross Elasticity of Demand

23. THANK YOU