Subject: Management Principles

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• Subject Management Principles Organizational
  behavior

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Introduction- Demand

• Demand means a desire or wish to buy and consume
  a commodity or service.
• But in economics a mere desire or wish does not
  constitute demand

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Introduction- Demand

• The growth rate of over 25 percent in IT/ITES
  sector of India is leading to a tremendous demand
  of qualified IT professional
• The demand supply gap of wheat in 2007 was 40
  lakh tonnes
• The India hydrocarbon Vision 2025 Report
  estimates that the demand for natural gas is
  expected to show a sharp rise in future.

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Demand

• Demand is defined as that want, need or desire
  which is backed by willingness and ability to buy
  a particular, commodity, in a given period of
  time
• Demand is effective desire, as it is backed by
  willingness to pay and ability to pay.

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Demand Function

• D f ( t, y, P, N, F, D, C, B)
• D Quantity of demand
• T tastes and preference of the consumer
• P price of substitute
• N Number of consumers
• F Expectation of future price rise
• D Distribution of income
• C Climate and weather
• B State of business

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Determinants of Demand

• Price of demand(-)
• Income of the consumer() ( Normal Goods
  Inferior Goods)
• Price of related goods or substitute (
  Substitutes complements)
• Substitutes are goods that satisfy a similar
  need and can be used as replacement of each
  other. Complements are demanded jointly.
• Tastes and preferences
• Advertising

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Advertising facts

• A survey of rural consumers has shown an amazing
  finding that for most of the product categories
  surveyed, the consumers were not influenced by
  advertisements or promotions
• 73 of respondent feel that promotion has not or
  moderate effect on buying various products, which
  included detergent powder, bathing soap, shampoo,
  hair oil, watches, tea, edible and bicycle.
• 54 and 75mof rural consumer give importance for
  soft drink and edible oil

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• Advertisement is a wasteful expenditure. Do you
  agree?

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Determinants of demand

• Consumers expectation of future income and price
• Population
• Climate and Weather
• Growth of Economy

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Types of Demand

• Direct and derived demand
• Consumer goods It is the commodity demanded for
  its own sake by the final consumer is called
  direct demand
• Capital goods It is the commodity demanded for
  using as a raw material or intermediary purpose
  then it is called as derived demand
• Ex New building, mobile accessories

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Types of Demand

• Recurring and Replacement demand
• Consumable demand have recurring demand durable
  consumer goods are purchased to be used for a
  long time but they need replacement

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Types of Demand

• Complementary and competing demand
• Complementary demand When one commodity is
  demanded to satisfy a single want, such demand is
  called as joint or complementary demand.
• Competing demand Goods that compete with each
  other to satisfy any particular want are called
  substitute

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Types of Demand

• Individual and market demand
• Demand for an individual consumer is individual
  demand.
• Industry demand is the demand for the product
  produced by all the firms in the industry.

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Law of Demand

• The Law of demand states that people will buy
  more at lower prices and buy less at higher
  prices
• Paul
  samuelson

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Law of Demand

• Law of demand can be understood with the
  following
• Price effect
• Substitution effect
• Income effect
• Law of diminishing marginal utility

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Law of demand

• Price effect It explains why a fall in price
  results in rise in demand and vice versa.
• Example Multiple use product like milk,
  electricity, coal or steel

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Law of demand

• Substitution effect When price of a commodity
  falls, it becomes more easily affordable and thus
  more attractive to the consumer
• Income effect Fall or rise in income has the
  effect on demand
• Law of diminishing marginal utility As per Law
  of Diminishing Marginal utility, the utility
  derived from every next unit of a commodity
  consumer goes on falling.

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The Law of Demand
P1
P2
Q1
Q2
CHANGE IN PRICE change in quantity demanded
CHANGE IN OTHER change in demand
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The Law of Demand
CHANGE IN OTHER change in demand
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Demand Schedule and Demand Curve

• Demand Schedule It is the list or tabular
  statement of the different combinations of price
  and quantity demanded of a commodity.
• Demand Curve The demand curve shows the
  relationship between price of a good and the
  quantity demanded by consumers.

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Exceptions to the Law of demand

• Giffen Paradox ( Inferior goods)
• Sir Robert Giffen, an economist, was the first to
  give an explanation to this situation.
• Ireland scenario
• Snob Appeal (Veblen effect)
• In which consumer measures the satisfaction
  derived from their utility value, but by social
  status.

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Exception of Law of Demand

• Demonstration effect
• Demonstration effect is the influence on a
  persons behaviour
• Future expectation of prices (Panic buying)
• People purchase goods with the expectation that
  prices will rise more in the future.
• Goods with No substitutes
• Insignificant use of the product

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• That is all about Demand
• Thank you