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d1 Demand Analysis

The document discusses demand analysis, defining quantity demand and its relation to various factors such as price, income, and consumer preferences. It outlines the general, direct, and inverse demand functions, explaining how changes in these factors can shift demand curves. Additionally, it provides examples of demand schedules and the implications of movements along demand curves.

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alianahtalib01
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9 views22 pages

d1 Demand Analysis

The document discusses demand analysis, defining quantity demand and its relation to various factors such as price, income, and consumer preferences. It outlines the general, direct, and inverse demand functions, explaining how changes in these factors can shift demand curves. Additionally, it provides examples of demand schedules and the implications of movements along demand curves.

Uploaded by

alianahtalib01
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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DEMAND

ANALYSIS

SMAE
1
DEMAND
Quantity Demand – the amount of a good or service consumers
are willing and able to purchase during a given period of time.

Demand relations:
1. General demand function
2. Direct demand function
3. Inverse demand function
2
GENERAL DEMAND FUNCTION
The relation between quantity demanded and
the six factors that affect quantity demanded.
3
PRICE
Consumers are willing and able to buy more of a good the lower the price
of the good and will buy less of a good the higher the price of the good.

Price and quantity demanded are negatively (inversely) related because


when the price of a good rises, consumers tend to shift from that good to
other goods that are now relatively cheaper. Conversely, when the price
of a good falls, consumers tend to purchase more of that good and less of
other goods that are now relatively more expensive.
Normal Good 4
INCOME A good or service for which
an increase in income causes
Holding constant the rest of consumers to demand more
the variables that influence of the good, holding all other
variables in the general
consumers. An increase in demand function constant.
income can cause the
amount of a commodity
consumers purchase either Inferior Good
to increase or to decrease. A good or service for which
an increase in income causes
consumers to demand less of
the good, all other factors
held constant.
5
PRICES OF RELATED GOODS
Goods are substitutes if one good can be used in the place
1
of the other
When a fall in the price of one good reduces the demand for
another good, the two goods are called substitutes.

Goods are said to be complements if they are used in


2 conjunction with each other.
When a fall in the price of one good increases the demand
for another good, the two goods are called complements
6
TASTE PATTERNS ON CONSUMERS
T takes on larger values as consumers perceive a good becoming
higher in quality, more fashionable, more healthful, or more
desirable in any way. A decrease in T corresponds to a change in
consumer tastes away from a good or service as consumers
perceive falling quality, or displeasing appearance, or diminished
healthfulness.
7
EXPECTATIONS
Expectations of consumers also influence consumers’ decisions
to purchase goods and services. More specifically, consumers’
expectations about the future price of a commodity can change
their current purchasing decisions.
NUMBER OF CONSUMERS
increase in the number of consumers in the market will
increase the demand for a good, and a decrease in the number
of consumers will decrease the demand for a good, all other
factors held constant.
8
SLOPE PARAMETER
Recommendation 1
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Quisque non elit
mauris. Cras euismod, metus ac finibus.

Recommendation 2
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Quisque non elit
mauris. Cras euismod, metus ac finibus.
11
DIRECT DEMAND FUNCTION
A table, a graph, or an equation that shows
how quantity demanded is related to product
price, holding constant the five other variables
that influence demand: Qd = f (P)

𝑸𝒅 = f (P, 𝑴, 𝑷𝑹 ) = f (P)
12
TO ILLUSTRATE THE DERIVATION
𝑄𝑑 = 3,200 – 10P + 0.05M – 24𝑃𝑅

𝑄𝑑 = 3,200 – 10P + 0.05(60,000) – 24(200)


= 3,200 – 10P + 3,000 – 4,800
= 1,400 – 10P

If P = $60
𝑄𝑑 = 1,400 – (10 x 60) = 800

If P = $40
𝑄𝑑 = 1,400 – (10 x 40) = 1,000
DEMAND SCHEDULE 13

A demand schedule (or Objective 2


table) shows a list of Lorem ipsum dolor sit amet,
several prices, and the consectetur adipiscing elit.
quantity demanded per Quisque non elit mauris. Cras
period of time at each of euismod, metus ac finibus
the prices finibus.
DEMAND CURVE 14

A graph showing the relation Objective 2


between quantity demanded Lorem ipsum dolor sit amet,
and price when all other consectetur adipiscing elit.
variables influencing quantity Quisque non elit mauris. Cras
demanded are held constant. euismod, metus ac finibus
finibus.
INVERSE DEMAND FUNTION 15

The demand function when price is expressed as


a function of quantity demanded: P = f(𝑸𝒅 )

Every point on a demand curve can be


Demand price
interpreted in either of two ways: - The maximum price
(1) the maximum amount of a good that will be consumers will pay
purchased if a given price is charged or for a specific amount
(2) the maximum price that consumers will pay of a good or service
for a specific amount of a good.
16
MOVEMENTS ALONG DEMAND
Change in Quantity Demand
A movement along a given demand curve that
occurs when the price of the good changes, all
else constant.

Shift in demand
When any one of the five variables held constant
when deriving a direct demand function from the
general demand relation changes value, a new
demand function results, causing the entire
demand curve to shift to a new location.
17

Lorem ipsum dolor sit amet,


consectetur adipiscing elit.
Quisque non elit mauris. Cras
euismod, metus ac finibus
finibus.
18
TO ILLUSTRATE THE DERIVATION
𝑄𝑑 = 3,200 – 10P + 0.05M – 24𝑃𝑅

𝑄𝑑 = 3,200 – 10P + 0.05(64,000) – 24(200)


= 1,600 – 10P
𝐷1 : 𝑄𝑑
If P=$60
𝑄𝑑 = 1,600 – (10 x 60) = 1,000

If P = $40
𝑄𝑑 = 1,600 – (10 x 40) = 1,200
19
IMPLEMENTATION
Increase in Demand Determinants of Demand
A change in the demand function that Variables that change the quantity
causes an increase in quantity demanded demanded at each price and that
at every price and is reflected by a determine where the demand curve is
rightward shift in the demand curve. located: M, PR , 7, PE , and N.

Decrease in Demand Change in Demand


A change in the demand function that A shift in demand, either leftward or
causes a decrease in quantity demanded rightward, that occurs only when one of
at every price and is reflected by a the five determinants of demand
leftward shift in t changes.
End of discussion

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