Page 103 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Microeconomic Theory

Notes
6.20 Measurement of Cross Elasticity of Demand

6.21 Nature and Degrees of Cross Elasticity of Demand

6.22 Importance of Price Elasticity of Demand
6.23 Summary

6.24 Keywords
6.25 Review Questions

6.26 Further Readings

Objectives

After studying this unit, students will be able to:
• Know about Concept of Demand.

• Learn about Price Elasticity of Demand.
• Know about Income Elasticity of Demand
• Understand about Cross Elasticity of Demand.

Introduction
‘Demand’ word is used in a specific meaning in economics. Generally Desire, Want and Demand
are used in a particular meaning, but in economics, these three words have different meanings.
Desire is a wishful thinking. If you wish to buy a colour T.V. but you do not have enough money so
economically, wish or want is only Desire or Wishful Thinking, not the demand and if you do not
want to spend on a colour T.V. after having sufficient money, then this wish will only be called as
Want, not the demand.

6.1 Concept of Demand

In economics, Demand word is used in a specific meaning. Generally Desire, Want and Demand
are used in a particular meaning, but in economics these three words have different meanings.
Desire is a wishful thinking. If you wish to buy a colour T.V. but you do not have enough money
so economically, wish or want is only Desire or
Wishful Thinking, not the demand and if you In an Independent Market Economy, Demand of a
do not want to spend on colour T.V. after commodity has not any independent identity without
having sufficient money, then this wish will context of price. Demand is always estimated in the
only be called as Want, not the demand. This context of price.
want, only in that situation will terminate in
Demand in which on a given time period and a given price, you are ready to buy a colour T.V. As
this, Demand should be defined in the context of a given price and a given time period. Demand
is defined as the quantity of a product which a consumer is not only desiring to purchase and
able to purchase but is also ready to purchase at a given price and a given point of time. In other
words, this refers the relation between the Price and Demand. This indicates that at different prices,
how much quantity of a commodity will be demanded. Here, it is necessary to let you know

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