Demand, Types of Demand, Marginal utility

1. DEMAND ANALYSIS
PRESENTED BY
SIMRAN KAUR

2. DEMAND
Demand is 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

3. UTILITY FUNCTION
• A utility function is a descriptive statement that
relates satisfaction or well being to the
consumption of goods and services
• If there are n commodities in the bundle with
quantities x1, x2, …..,xn then utility is
U = f(x1,x2,….,xn)

4. MARGINAL UTILITY
Marginal utility measures the added satisfaction
derived from a one unit increase in consumption
of a particular good or service, holding
consumption of other goods and services constant

5. LAW OF DIMINISHING MARGINAL
UTILITY
• The law of diminishing marginal utility states
that “as an individual increases consumption of
a given product within a set period of time, the
managerial utility gained from consumption
eventually declines”
• According to this law, a consumer tries to
equalize marginal utility of a commodity with its
price so that his satisfaction is maximized

6. EQUILIBRIUM OF THE CONSUMER
There is a simple model of a single commodity X,
the consumer can either buy X or retain his money
income Y. Under these conditions, the consumer
is in equilibrium when the marginal utility of X is
equated to its market price(pX)
MUX = pX

7. TYPES OF DEMAND
• DIRECT DEMAND: Producers’ goods and
consumers’ goods demand for goods that are
directly used for consumption by the ultimate
consumer. Example, Demand for T-shirts
• INDIRECT DEMAND: Demand for goods that
are used by producers for producing goods and
services. Example, Demand for cotton by a
textile mill

8. TYPES OF DEMAND
• DERIVED DEMAND: When a product derives
its usage from use of some primary product.
Example, demand for tyres derived from
demand of car
• AUTONOMOUS DEMAND: Demand for a
product that can be independently used.
Example, demand for a washing machine

9. TYPES OF DEMAND
• DURABLE GOODS: Goods that can be used
more than once over a period of time. Example,
microwave oven
• NON-DURABLE GOODS: Goods that can be
used only once. Example, band-aid

10. TYPES OF DEMAND
• FIRM DEMAND: Demand for the particular
firm. Example, Dove soap
• INDUSTRY DEMAND: Demand for the product
of a particular industry. Example, Demand for
steel in industry

11. TYPES OF DEMAND
• SEGMENT DEMAND: A particular segment of
markets demand. Example, demand for laptops
by engineering students
• TOTAL MARKET DEMAND: Sum total of
demand for laptops by various segments in India

12. TYPES OF DEMAND
• SHORT-RUN DEMAND: Demand with its
immediate reaction to price changes and income
fluctuations
• LONG-RUN DEMAND: Demand that will
ultimately exist as a result of the changes in
pricing, promotion or product improvement
after market adjustment with sufficient time

13. TYPES OF DEMAND
• COMPOSITE DEMAND: Demand in which a
good is wanted for several different users.
Example, demand for iron rods for various
purposes
• JOINT OR COMPLEMENTARY DEMAND:
When two goods are demanded in conjunction
with one another at the same time to satisfy a
single want. Example, demand for petrol and
two wheelers

14. TYPES OF DEMAND
• PRICE DEMAND: The ability and willingness to
buy specific quantities of a good at the prevailing
price in a given time period
• INCOME DEMAND: The ability and willingness
to buy a commodity at the available income in a
given period of time
• CROSS DEMAND: The ability and willingness to
buy a commodity or service at the prevailing
price of the related commodity, i.e., substitutes
or complementary products

15. THANK YOU!!!