Demand

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Demand is the quantity of a commodity which a buyer desires, is able and willing to buy at a given price at a given point of time. It requires five essential factors: desire, willingness to buy, abili…

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The demand function specifies a mathematical relationship between demand for a good and its determinants. Where: Dx = Demand for commodity X, Px = Price of commodity X, Py = Price of related commodity…

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The Law of Demand states: 'When other factors influencing demand remain unchanged, if price of a good falls, its demand expands and if price of a good rises, its demand contracts.' This shows an inver…

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1. Tastes and preferences remain unchanged, 2. Income of consumer remains unchanged, 3. Prices of substitute and complementary goods remain unchanged, 4. Consumers do not anticipate future price chang…

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Income Effect occurs when price of a good falls while monetary income remains constant, causing real income (purchasing power) to rise. For example, if you have ₹50 and milk costs ₹50/litre, you can b…

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Substitution Effect occurs when the price of a good falls, making it relatively cheaper than its substitutes. Consumers reduce consumption of substitutes and increase demand for the cheaper good. Exam…

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Substitute goods are those which can be easily used in place of one another as they have similar characteristics and satisfy the same want. Examples: Different brands of televisions, motorcycles, refr…

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Complementary goods are consumed together jointly - one cannot be consumed without the other. Examples: Mobile phone and SIM card, air conditioner and electricity, spectacle frame and spectacle glasse…