Demand from left to right. 3. Want, Tastes
Demand is defined as quantitative reflection of orientation of the people, at a particular price, per unit of clock time.
Demand for commodity is affected by several gene such as Price, income and price of related goods. The routine of relationship between the requirement for a commodity and the factors affecting it is called demand function.
Main factors, other than price, which affect the market demand for a product are: –
The requirement for a good depends upon its toll. People prefer to buy more at a lower price and less at a higher price. Cost and measure requested are contrarily related and request bended shape slant downwards from left to right.
As the income of the consumer step-ups the quantity of demand will increase and as the income dusk the demand also reduction. Income and demand are positively correlated. Demand curvature gradient upward from left to right.
3. Want, Tastes and Preferences:
Demand for trade good influenced by the factors like wants of the consumer, their sense of taste, orientation and fashion. Wants and fashion changes the demand for some commodities gain while other lessening.
4. Price of substitutes:
Demand for one commodity not only depends upon its monetary value but is also influenced by the Mary Leontyne Price of substitute goods price and demand are positively related.
5. Prices of Complementary Goods:
Like automobile and petrol, the price and quantity requirement are inversely proportional. For example, if a price of car gains the need for petrol will decrease.
6. Size of Population:
Larger the size of universe greater is the demand for trade good and vice versa. With an increase in the population the demand for various good increases and vice versa.
7. Climatic Conditions:
Climatic variations influence the demand for some good for example coolers and refrigerator etc. are demanded during summer and woolen demanded during winter. Changes in climatic conditions have an impact on demand for trade good and services
8. Customs and Conventions:
Demand for some good is influenced by customs and custom for example demand for new article of clothing during festival time of year, demand for gold during summer etc
Demand for commodities will be influenced by Advertisement run and sales packaging strategies. Attractive advertisement mass will be induced to steal certain commodities.
10. Social Environment:
It influences Demand for certain commodities, for example, people bread and butter in posh localities create demand for a railway car.
If the government want to encourage the consumption of certain commodities it can offer revenue enhancement conceding & subsidies and encourage the people to buy them or increase the tax to reduce them.
Elasticity of Demand
The law of demand explains the direction in which the demand changes for a given change in price.
“Elasticity of demand is classified into 5 different types
1. Perfectly elastic demand
2. Perfectly inelastic demand
3. Relatively elastic demand
4. Relatively inelastic demand
5. Unitary elastic demand” (gaurav, 2009)
“1. Perfectly elastic demand
A small alteration in the Price leading to an infinite change in quantity demanded.
2.Perfectly inelastic demand
Irrespective of the modification within the value the demand stays unchanged.
3.Relatively elastic demand
Proportionate modification in quantity demanded is greater than the proportionate change in toll”. (andy, 12)
4.Relatively inelastic demand
Proportionate variety in quantity demanded is less than the proportionate change in price.
5.Unitary elasticity of demand
Proportionate modification in quantity demanded equals to proportionate variety in price.
Price elasticity of demand can be measured by the following methods:
a) Proportionate or Arc Method
b) Total Outlay or Expenditure Method
It is used when price and need data is available. Sometimes one may have information about the price and the spending incurred on a commodity rather than price and demand. In such fount outlay method is used.
c) Diagrammatic or Point Method
The arc method is used to measure elasticity of need between two spots in time of a need curvature. One should bear in idea that a particular full point of a need curve consists of a group of Leontyne Price and a group of quantity need ed. The elasticity of demand at any point of a demand curve can be measure by diagrammatic method.
Elasticity of Supply
The legal philosophy of supplying indicates the direction of modification —if the Price goes up, supply will gain. But how much supply will advance in answer to an increase in price cannot be known from the practice of law of supply. To quantify such change, we require the concept of elasticity of supply that measures the extent of quantity supplied in response to a change in price.
Elasticity of supply is classified into 5 different types
1. Elastic supply
2. Inelastic supply
3. Unit elasticity of supply
4. Perfectly elastic supply
5. Perfectly inelastic supply
Supply is said to be elastic when a given percentage alteration in price leads to a larger change in quantity supplying.
Supply is said to be inelastic when a given percentage alteration in Leontyne Price causes a smaller change in measure supplied.
3.Unit elasticity of supply
If monetary value and quantity supplied change by the same magnitude, then we have a unit of measurement snap of supply.
4.Perfectly elastic supply
When there is an infinite supplying at a term and the supply becomes zero with a rebuff fall in price, then the supply of such a commodity is said to be perfectly rubber band.
5.Perfectly inelastic supply
When the supply does not modification with a modification in cost, then supply for such a good is said to be perfectly inelastic.
“Price elasticity of supply can be measured by the following methods:
Like elasticity of demand, the most common method for measuring price elasticity of supply (Es) is share method. This method is also known as ‘Proportionate Method acting elasticity is measured at a given point on the supply curve. This method is also known as ‘Electric arc Method acting’ or ‘Point Method. According to this method, elasticity is measured as the ratio of percentage variety in the quantity supplied to percentage alteration in the price.
2. Geometric Method
elasticity is measured at a given point on the supply curve. This method is also known as ‘Point Method”. (http://www.google.com/intl/en/policies/privacy/)
(n.d.). Retrieved from http://www.google.com/intl/en/policies/privacy/.
andy. (12, dec 29). Creative commons. Retrieved from https://2012books.lardbucket.org/books/economics-principles-v1.0/s08-01-the-price-elasticity-of-demand.html.
gaurav. (2009, 6 8). Kal Yan city life. Retrieved from http://kalyan-city.blogspot.ru/2009/08/demand-price-law-of-demand-determinants.html.