Page 23 - DECO101_MICRO_ECONOMICS_ENGLISH

Micro Economics

Notes 2. Perishable and durable goods: Perishable goods become unusable after sometime, the rest
are durable goods. To be precise, perishable goods are those which can be consumed only
once while in the case of durable goods, their services only are consumed.

Example: Milk and food items are perishable goods and cars, books, pen, clothes
and home appliances are durable goods.
Durable goods pose more complicated problems for demand analysis than do non-durables.
Sales of non-durables are made largely to meet current demands which depends on current
conditions. In contrast, sales of durable goods go partly to satisfy new demand and partly
to replace old items. It can be seen that the durable goods are generally more expensive
than the perishable goods. Also, based on the current and expected market conditions,
demand for durable goods can be preponed or postponed.

3. Autonomous and derived demand: You must have noticed that our demand for basic
necessities, like demand for food, clothing and shelter, is independent of demand for any
other good. On the other hand, demand for labour is dependent on our demand for houses
or products and demand for mobile phones depend on our demand for communication
with each other. The goods whose demand does not depend on the demand for some
other goods are said to have autonomous demand, while the rest have derived demand.
However, there is hardly anything whose demand is totally independent of any other
demand. But the degree of this dependence varies widely from product to product. Thus,
the autonomous and derived demand varies in degree more than in kind.

4. Firm and industry demand: You must have heard or seen situations where the industry

does not have jobs to offer but still a particular firm in that specific industry is hiring people.

This shows us that there can be a difference between industry and firm demand. Since,
goods are produced by more than one firm , so there is a difference between the demand

facing an individual firm and that facing an industry. (All firms producing a particular

good constitute an industry engaged in the production of that good). For example, demand

for Hyundai car alone is a firm’s demand and demand for all kinds of cars is industry’s
demand.
5. Demand by market segments and by total market: It can happen that a particular brand
of cold drink is not doing well in India but in a particular region, say north, it is doing
well. In this case, we can say that the demand in the total market is negligible but in a
market segment (north), the demand is high. If the market is large in terms of geographical
spread, product uses, distribution channels, customer sizes or product varieties, and
if any one or more of these differences were significant in terms of product price, profi t

margins, competition, seasonal patterns or cyclical sensitivity, then it may be worthwhile
to distinguish the market by specific segments for a meaningful analysis. In that case, the

total demand would mean the total demand for the product from all market segments
while a particular market segment demand would refer to demand for the product in that
specific market segment.

Caselet Transportation as a Derived Demand

n economic systems what takes place in one sector has impacts on another; demand
for a good or service in one sector is derived from another. For instance, a consumer
Ibuying a good in a store will likely trigger the replacement of this product, which will
generate demands for activities such as manufacturing, resource extraction and, of course,
transport. What is different about transport is that it cannot exist alone and a movement
Contd...

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