Maharashtra Board Class 12 Economics Chapter 3A Demand Analysis PDF Download

Demand Analysis

Introduction

You have already studied the concept of utility in the previous chapter. Utility is the basis of demand. Utility may generate a desire or a need to have a particular commodity, but utility on its own cannot generate demand for the commodity. This chapter is an effort to analyse the concept of demand. Demand analysis is concerned with consumer behaviour.

Meaning of Demand

In ordinary language, demand means a desire. Desire means an urge to have something. In Economics, demand means a desire which is backed by willingness and ability to pay.

For example, if a person has the desire to purchase a television set but does not have the adequate purchasing power then it will be simply a desire and not a demand.

Thus, demand is an effective desire. All desires are not demand.

In short, Demand = Desire + willingness to purchase + Ability to pay.

Try This

Identify the concepts:

1) A poor person wants to have a car

2) A rich person bought a car

Definition of Demand

According to Benham, "the demand for anything at a given price is the amount of it, which will be bought per unit of time at that price."

Thus, following are the features of demand:

1) Demand is a relative concept.

2) Demand is essentially expressed with reference to time and price.

Teacher's Note

Demand is not just wanting something. A child may want a mobile phone, but if they have no money, it is just a desire. When they have money and want to buy it, that is demand. Like when you want to buy snacks from the school canteen with your pocket money.

Exam Trick

Remember: Desire + Money + Willingness = Demand. Think of it like this: you want a chocolate, you have ₹10, and you are ready to buy it. This is demand. If you only want it but have no money, it is just desire.

Points to Remember

Demand means you want something and can afford it.
Demand always has a price and time period.
A poor person wanting a car is just a desire.
A rich person buying a car is real demand.
Desire alone is not demand in economics.

Demand Schedule

Demand schedule is a tabular representation of the functional relationship between price and quantity demanded for a particular commodity.

A demand schedule may be either individual demand schedule or market demand schedule.

Individual Demand Schedule

Individual demand is the quantity of a commodity demanded by a consumer at a given price during a given period of time.

Individual demand schedule is a tabular representation showing different quantities of commodities that an individual consumer is prepared to buy at various prices over a given period of time.

This can be explained with the help of the following individual demand schedule.

Table 3.1 shows different quantities of commodity 'x' purchased by an individual consumer at various prices. It can be observed that less quantity of commodity is demanded at rising prices and more quantity of commodity is demanded at falling prices. It indicates an inverse relationship between price and quantity demanded.

Individual Demand Curve

Individual demand curve is a graphical representation of the individual demand schedule.

Fig. 3.1 represents an individual demand curve which is based on table 3.1.

In figure 3.1, X axis represents quantity demanded and Y axis represents the price of the commodity. The demand curve DD slopes downward from left to right, indicating an inverse relationship between price and quantity demanded.

Teacher's Note

When you go to buy ice cream and the price is high, you buy less. When the price is low, you buy more. This is the demand curve. It always goes down because lower price means more buying.

Exam Trick

Remember: Demand curve goes DOWN from left to right. It looks like a slide. High price on the left = less quantity. Low price on the right = more quantity.

Points to Remember

Demand curve shows price on one axis and quantity on the other.
The demand curve always slopes downward.
When price goes up, quantity demanded goes down.
When price goes down, quantity demanded goes up.
This is called an inverse relationship.

Market Demand Schedule

Market demand is total demand for a commodity from all the consumers at a given price during a given period of time.

Market demand schedule is a tabular representation showing different quantities of commodity which all consumers are prepared to buy at various prices over a given period of time.

It is obtained by a horizontal summation of the demand of all consumers at various prices. It also indicates an inverse relationship between price and quantity demanded.

This can be explained with the help of following market demand schedule.

Table 3.2 shows different quantities of commodity x purchased by different consumers (A, B, C) at various prices. It can be observed that less quantity of commodity is demanded at rising prices and more quantity of commodity is demanded at falling prices. Thus, there is an inverse relationship between price and quantity demanded.

Market Demand Curve

Graphically, the market demand curve is a horizontal summation of individual demand curves. It is based on the market demand schedule. Fig. 3.3 represents the market demand curve.

In figure 3.3, X axis represents market demand and Y axis represents the price of the commodity. The market demand curve 'DD' slopes downward from left to right, indicating an inverse relationship between price and market demand.

Teacher's Note

Market demand is the total demand from everyone in the market. If you add up how much ice cream all people in your area want to buy at each price, you get market demand. It also slopes down like individual demand.

Exam Trick

Remember: Market demand = All consumers' demand added together. If 5 people want 10 kg at ₹5, and 10 people want 20 kg at ₹3, then market demand at ₹5 is 50 kg total.

Points to Remember

Market demand is the sum of all individual demands.
Market demand curve also slopes downward.
More consumers mean higher market demand at each price.
The market demand curve is made by adding all individual demand curves.
Lower price brings new customers into the market.

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