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: –

1.   Price

The requirement for a
good depends upon its toll. People prefer to buy more at a lower price and less
at a higher price. Price and measure demanded are inversely related and demand
curved shape slope downwards from left to right.

2.    Income:

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

9.   Advertisement:

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.

11.Government Policy:

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

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 stay unchanged.

3.Relatively elastic
demand

Proportionate
modification in quantity demanded is greater than the proportionate change in
toll.

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

 

1.Elastic supply

Supply is said to be
elastic when a given percentage alteration in price leads to a larger change in
quantity supplying.

2.Inelastic supply

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.

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