Demand:

1
Demand
It is the quantity of a good or service that
customers are willing and able to purchase during
a specified period under a given set of economic
conditions.
Direct Demand
Derived Demand
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Demand Function Qx f (Px , I , Py , T )
Demand Curve
It shows the relationship between the quantity
demanded of a commodity with variations in its
own price while everything else is considered
constant.
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The Law of Demand
The inverse relationship between the price of a
commodity and the quantity demanded per time
period is referred to as the law of demand.
P1
P2
0
Q
Q1
Q2
4
Utility Theory
Utility is a measure of the satisfaction a
consumer derives from consuming goods and
services.
Marginal Utility
Whereas total utility measures the consumers
overall level of satisfaction derived from
consumption activities, marginal utility measures
the added satisfaction derived from a one unit
increase in consumption of a particular good or
service, holding consumption of all other goods
and services constant.
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Indifference Curve
It represents different combinations of two
commodities which gives the consumer the same
level of satisfaction.
The Law of Diminishing Marginal Utility
This simply says that as a consumer increases the
consumption of a particular commodity, the
marginal utility gained from consumption
eventually declines.
6
Y
9
5
3
1
1
2
3
X
Indifference Curves
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Budget Line I PxQx PyQy
Y
Y
X
0
X
8
Y
x1
x2
x3
X
Y
P1
P2
P3
X
x1
x2
x3
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Income Substitution Effect of a Price Change
Y
A
C
B
X1
X2
X3
X
Subs.
Income
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Qx f (Px , I , Py , T )
P1
Q1
0
Q2
Q3
Normal Good
Inferior Good
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Market Demand Curve
It is the horizontal summation of all the
individual demand curves for a commodity.
Market Demand
Individual 2
Individual 1
P1
P1
P1
P2
Q1
Q2
Q1Q2