Law Of Demand

Demand is negatively correlated with price. If price increases, demand will decrease. Ceteris paribus (All other variables are constant).

The table below shows price – demand correlation. The shift along the curve shows the demand-price correlation; when price increases, demand decreases and visa versa.

The market demand is the sum of the demand of all individuals (Jay and Vijay) in a market.

Types of markets:

• Perfectly Competitive Market
  • Simple Demand – Supply graph is based on these markets.
  • Unlimited sellers in the market, the price is set by market demand
  • Firms can enter and exit the market at any time
• Oligopoly Market
  • Few but large markets in the firm
• Monopoly Market

Shifts in Demand – caused my factors other than price

Determinants of demand:

1. Income
   a. Normal goods
   b. Inferior goods
   c. Luxury goods
2. Price of related goods. (Competitor goods or Complimentary goods)
   a. Mango and Lychee
   b. Tea and Coffee
3. Preferences
4. Expectation of future prices
   a. Hand Sanitizer example
5. Number of Buyers in the market