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Unit 2: Demand Analysis
Tanima Dutta, Lovely Professional University

Unit 2: Demand Analysis Notes

CONTENTS

Objectives
Introduction
2.1 The Concept of Demand: An Introduction
2.1.1 Determinants of Demand
2.1.2 Types of Goods and Demand
2.2 Law of Demand
2.3 Exceptions to Law of Demand
2.4 Shift and Movement of Demand Curve
2.5 Summary
2.6 Keywords
2.7 Self Assessment
2.8 Review Questions
2.9 Further Readings

Objectives

After studying this unit, you will be able to:
Identify the determinants of demand
State the law of demand
Know the exceptions to law of demand
Discuss the effect of shift and movement in demand curve

Introduction

Demand and supply are two most fundamental concepts in economics. Demand conveys a wider

and definite meaning than in the ordinary usage. Ordinarily, demand to you would mean your
desire to buy something, but in economic sense it is something more than a mere desire. It is
interpreted as your want backed up by your purchasing power. Further demand is per unit of
time such as per day, per week etc. Moreover, it is meaningless to mention demand without

reference to price. Considering all these aspects the term demand can be defined in the following
words, “Demand for anything means the quantity of that commodity, which is desired to be
bought, at a given price, per unit of time.”

Example: Suppose price of a pen is ` 10 per unit of time. At this price, people are willing
to buy 100 units of that pen at a specific point of time. So, it is the demand for that pen.

2.1 The Concept of Demand: An Introduction

Demand is one of the crucial requirements for the existence of any business enterprise. A fi rm is
interested in its own profit and/or sales, both of which depend partially upon the demand for

its product. The decisions which management takes with respect to production, advertising, cost
allocation, pricing, etc., call for an analysis of demand.

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