Law of Demand (मांग का नियम) !! Full Concept Complete Explanation
3.6 هزار بار بازدید -
2 سال پیش
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Free Notes Download Link - https://t.me/jhansi_institute CHAPTER 5 THEORY OF DEMAND SESSION 2022-23
00:50 Law of Demand Explanation
04:54 Assumption of Law of Demand
06:01 Why More of a Good is Purchased When its Price Fall ? or Why does demand curve slope downward ?
12:37 Exceptions to the law of demand
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LAW OF DEMAND
The law of demand states that, other things being equal, quantity demanded increases with a decrease in own price of the commodity, and vice versa. In other words, there is an inverse relationship between quantity demanded of a commodity and its own price other thing remaining constant. The term other things being equal implies that all other determinants of demand other than own price of the commodity remain constant.
Assumptions of the Law of Demand
(i) Tastes and prefrences of the consumer reamin constant.
(ii) There is no change in income of the buyers.
(iii) Prices of the related goods do not change.
(iv) Consumers do not expect any significant change in the availability of the commodity in the near future.
Why More of a Good is Purchased When its Price Fall ? Or Why does Demand Curve Slope Downward?
(1) Law of Diminishing Marginal Utility: According to this law, as consumption of a commodity increases, marginal utility derived from each successive unit goes on diminishing. Accordingly, for every additional unit to be purchased, the consumer is willing to pay less and less price.
(2) Income Effect: Income effect refers to the effect on quantity demanded when real income of the buyer changes owing to change in price of the commodity. With a fall in price, real income increases. Accordingly, demand for the commodity expands.
(4) Substitution Effect: Substitution effect refers to substitution of one
commodity for the other when it becomes relatively cheaper. Thus, when own price of commodity-X falls, it becomes cheaper in relation to commodity-Y. Accordingly, X is substituted for Y.
(5) Size of Consumer Group: When price of a commodity falls, many more buyers can afford to buy it. Accordingly, demand for the commodity expands.
(6) Different Uses: A good may have several uses. Milk, for example, is used for making curd, cheese and butter. If price of milk reduces, it will be put to different uses. Accordingly, demand for milk expands
Demand Curve Slopes Upward when Law of Demand Fails
Exceptions to the Law of Demand
(1) Articles of Distinction: According to Prof. Veblen, certain goods are ‘articles of social distinction’. These goods are demanded only because their prices are very high.
(2) Giffen Goods: Giffen goods are highly inferior goods, showing a very high negative income effect. As a result, when price of such commodities falls, their demand also falls, even when they happen to be relatively cheaper than other goods. This is popularly known as ‘Giffen Paradox’.
(3) Irrational Judgement: Law of demand fails when consumers judge the quality of a commodity by its price. It is an irrational judgement. Perhaps it is owing to a huge price difference between ‘organic’ and ‘non-organic’ products in the market, that richer sections of the society consider organic products as of very high quality.
#lawofdemand
#law_of_demand
#assumptionsoflawofdemand
#whymoreofagoodispurchasedwhenpricefalls
#exceptionsoflawofdemand
00:50 Law of Demand Explanation
04:54 Assumption of Law of Demand
06:01 Why More of a Good is Purchased When its Price Fall ? or Why does demand curve slope downward ?
12:37 Exceptions to the law of demand
Social Accounts for Regular Updates –
Instagram - Instagram: raikwar.pan..
Facebook - Facebook: jhansiinstitute
Twitter - Twitter: jhansi_institut
Telegram - https://t.me/pankajraikwar
LAW OF DEMAND
The law of demand states that, other things being equal, quantity demanded increases with a decrease in own price of the commodity, and vice versa. In other words, there is an inverse relationship between quantity demanded of a commodity and its own price other thing remaining constant. The term other things being equal implies that all other determinants of demand other than own price of the commodity remain constant.
Assumptions of the Law of Demand
(i) Tastes and prefrences of the consumer reamin constant.
(ii) There is no change in income of the buyers.
(iii) Prices of the related goods do not change.
(iv) Consumers do not expect any significant change in the availability of the commodity in the near future.
Why More of a Good is Purchased When its Price Fall ? Or Why does Demand Curve Slope Downward?
(1) Law of Diminishing Marginal Utility: According to this law, as consumption of a commodity increases, marginal utility derived from each successive unit goes on diminishing. Accordingly, for every additional unit to be purchased, the consumer is willing to pay less and less price.
(2) Income Effect: Income effect refers to the effect on quantity demanded when real income of the buyer changes owing to change in price of the commodity. With a fall in price, real income increases. Accordingly, demand for the commodity expands.
(4) Substitution Effect: Substitution effect refers to substitution of one
commodity for the other when it becomes relatively cheaper. Thus, when own price of commodity-X falls, it becomes cheaper in relation to commodity-Y. Accordingly, X is substituted for Y.
(5) Size of Consumer Group: When price of a commodity falls, many more buyers can afford to buy it. Accordingly, demand for the commodity expands.
(6) Different Uses: A good may have several uses. Milk, for example, is used for making curd, cheese and butter. If price of milk reduces, it will be put to different uses. Accordingly, demand for milk expands
Demand Curve Slopes Upward when Law of Demand Fails
Exceptions to the Law of Demand
(1) Articles of Distinction: According to Prof. Veblen, certain goods are ‘articles of social distinction’. These goods are demanded only because their prices are very high.
(2) Giffen Goods: Giffen goods are highly inferior goods, showing a very high negative income effect. As a result, when price of such commodities falls, their demand also falls, even when they happen to be relatively cheaper than other goods. This is popularly known as ‘Giffen Paradox’.
(3) Irrational Judgement: Law of demand fails when consumers judge the quality of a commodity by its price. It is an irrational judgement. Perhaps it is owing to a huge price difference between ‘organic’ and ‘non-organic’ products in the market, that richer sections of the society consider organic products as of very high quality.
#lawofdemand
#law_of_demand
#assumptionsoflawofdemand
#whymoreofagoodispurchasedwhenpricefalls
#exceptionsoflawofdemand
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