Page 30 - DECO101_MICRO_ECONOMICS_ENGLISH

Unit 2: Demand Analysis

2.6 Keywords Notes

Autonomous demand: when a particular commodity is demanded for its own sake

Demand: The quantity of the commodity which an individual is willing to purchase per unit of
price at a particular time.
Derived demand: Goods whose demand is tied with the demand for some other goods

Direct demand: Goods whose demand is not tied with the demand for some other goods

Demand function: A comprehensive formulation which specifies the factors that infl uence the
demand for the product
Veblen goods: Goods that are perceived to be exclusive as long as prices remain high or increase

Inferior goods: a good that decreases in demand when consumer income rises

2.7 Self Assessment

State whether the following statements are true or false:
1. Demand of petrol is direct demand.
2. Demand is just a want or desire to purchase a product or a service.

3. Demand for labour is always a derived demand.
4. When price of tea goes up, then the demand for coffee is likely to go up as well.
5. When the price of X brand of soap went up, people began buying Z brand of soap. This
happened due to the substitution effect.
6. When the price of bread goes up, the demand for butter usually goes up.
Fill in the blanks:
7. Demand for machinery in industries is a ...................... demand.
8. Shoes and socks are ...................... goods.
9. The most basic source of demand is ...................... of the individuals.

10. The shape of the demand curve is ...................... sloping.
11. Usually, income of the individuals and demand have a ...................... relationship.

2.8 Review Questions

1. Define ‘demand’. Discuss different types of demand.
2. Explain the law of demand. Discuss some practical applications of law of demand.

3. Distinguish between direct and derived demand with help of suitable examples.
4. Examine the impact of increase in prices of a good on its:
(a) Substitutes
(b) Complements
5. “Demand for everything in this world is a derived demand.” Discuss

6. It is generally believed that when fares of airlines go up, the demand for railway travel also
goes up? Does this seem logical to you?

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