DEMAND

Group 1:

Babista, Francine Bernice Loreen

Antoinette
Bantulo, Honeybe
Bautista, Roxanne Faye
Diano, Juliebeth
Estrada, Therez Anne
Johannis, Christina Anne
Tan, Sharlene
Valenzuela, Ma. Katarina
Yting, Shekinah Mae

What is Demand ?

Demand refers to the number or

amount of goods and services
desired by the consumers at various
prices in a particular period of time

Quantity demand amount of

goods or services consumers are
willing and able to buy/purchase at
given price, place, and period of
time.

The law of demand states

That as the price increases, quantity

demanded decreases; and as price
decreases, quantity demanded
increases

Deals with the functional relationship

between price and the quantity
demanded

Ceteris Paribus Assumption

There are factors other than price influenced

the quantity demanded such as:
Tastes and preferences, income, expectation
on future prices, prices of related goods like
substitutes and complements, and the size of
population

The functional relationship between price and

quantity demanded is essential since these
nonprice factors remained constant (ceteris
paribus)

Justification for the Law of

Demand
Income effect
Substitution effect

Income effect

Implies that at a lower price,

the consumer have a greater
purchasing power

Substitution Effect

In case that the price of

goods that consumers buy
increases, they look for
substitutes with a lower price

Determinants of Demand

Influence the quantity of demand

Non priced determinants

Consumers Income

A change in income will cause a change

in demand
Normal Good

Refers to a good for which demand at every

price increases when income increases or
vice versa
Rice, Electricity, Water

Consumers Income

Inferior Good

Refers to a good for which demand falls

when income rises and vice versa
Public transportation

Consumers Expectation of Future Prices

Quantity of a good demanded within any

period depends not only on prices in that
period but also on prices expected in
future periods
Gasoline

Prices of Related Products

The demand for

any particular good
will be affected by
changesin the
prices of related
goods.

Prices of Related Products

The direction in which

the demand will
change in response to
a change in prices of
related products
depends on the
following relationships
of products:

1. Substitute Products
- are goods that can
be used in place of
other goods.

Prices of Related Products

2. Complementary
products - are goods
that go together or
cannot be udes
without the other
An example of this
would be the demand
for hotdogs and
hotdog buns

Consumers' Tastes and

Preferences

Consumers' tastes
and preferences
are major factors in
determining the
demand for any
product

Population

An increase in the
population means
more demand for
goods and services.
Inversely, less
population means
less demand for
goods and services.

Demand Function

Representation of the relationship between demand and

all of its determinants expressed in a mathematical
language using functional form.
Qdx = f(Px, Y, e, Prel, T, Pop)
Where :

Qdx = quantity demand

Px = price of goods and services
Y = income of consumers
e = consumers expectations of future prices
Prel = price of related products
T = consumers tastes and prefences
Pop = population size

Demand Function

The demand functions can be rewritten as follows if

all determinants except price are kept constant
(ceteris paribus)
Qdx = f (Px)

A linear equation can be constructed using the

simplified functional expression. This equation is a
representation of quantity demanded for good x in
a given period of time.
Qdx = a bPx
Linear Demand function for SUV
Qdx = 4000 500P

Demand for a product

Demand Schedule
Price of X
(per kilo)

Quantity Demanded
(in kilos)

P45
40
35
30
25
20

100
150
200
250
300
350

Demand Curve

A graphical presentation of

demand schedule
reality that price and demand move in
inverse directions

Normal demand curve slopes downward

from left to right

Changes in Quantity Demanded and

Movements along the Demand Curve

Factors Affecting the Demand Curve

Ceteris Paribus Assumption

assuming all other things remain

constant

Competition
Consumer population
Economic conditions
Positive/negative news