Law of Demand states ”If supply is held constant, an increase in demand leads to an increased market price, while a decrease in demand leads to a decreased market price.”

e.g. With increase in demand for Marketing Communication Services, pricies for such services are increasing too.

The law of demand is represented graphically by a downsloping demand curve. As shown in the figure, as and when there is decrease in price which is denoted as P1, P2, P3; there is increase in the demand i.e D1, D2, D3.

Now, this law can prove wrong in some cases like Inferior Goods. Inferior good is a good that decreases in demand when the consumers income rises, unlike normal goods, for which the opposite is observed. So whenever there is considerable decrease in the price of inferior good the demand for it also decreases.

I would like to add more into this in my next post. Till then..Ciao

Durga Sharma

http://www.amarketforce.com

“Rita desires to buy a house.” A closer inspection to this sentence reveals that Rita just has expressed the desire to own a house but its not clear if she can really buy the house. In simple words, its not clear if Rita wishes to pay the price of the house to fulfill her desire.

Desire and needs standsat the same level. There is no end to desire or need ever. There is only temporary phase where we feel that our need is fulfilled. As one level need gets fulfilled it leads to another one and there is no stopping.

In a market there are many factors that can affect demand for a product or service. These factors are:

• Price and Price of other goods (e.g. Increase in prices of Mangos leads to low consumption of the fruit and viceversa. Substitute and Complimentary products: Subsitutes like tea and coffee. If the price of tea increases people will opt for coffee and viceversa. Complimentary products like tea and sugar. You can not make tea without sugar and so they are complementary products. If price of one increases then other’s price will automatically increases.
• Income (e.g. Increase in dad’s income increases kid’s pocket money demand and also other family expenditure.)
• Economy (e.g. Economy on boom or recession)
• Taste and Preferences (e.g. Style keeps on changing and so does people’s taste and preference)
• Population or number of buyers (demand for land increase as the population increases.)
• Quality( Cost of Music CD is more that cassattes as the quality is also more.)
• Future Expectation (e.g. An increase in expected future price of a good increases current demand)

With every other factord constant, price is the main cause of change in demand. We can talk more about Demand and related terms in next post. Please let me know your all’s thoughts.

-Durga Sharma

http://www.amarketforce.com