Law of Demand Chapter -2 (11th Std New Syllabus 2019) Part- 2 Lecture. Created by Dr Irfana Smadani . This simple but not simplistic and easy to follow 20 minute, lecturer on Theory of demand | law of demand | Micro economics | Class 11 | Class 12( New Syllabus 2019) and C.A, CPT class as well as this lecturer is also meant for the Subjects & Chapters related to Commerce & Management

In today lecture contents are the extension and contraction in demand increase and decrease in demand movement across in demand cure shift in demand curve and types of demand. We all know that whenever there is a change in price of any commodity weather it increase or decrease it will have effect the law demand of quantity demand also changes. As all of us know that there is inverse relationship between the price and the quantity demanded Change in quantity demanded first is expansion and other is contraction likewise change in demand is segregated to increase in demand and decrease in demand. Let’s discuss the change in quantity demanded at first in this we take expansion. Expansion is nothing but increase in quantity demanded higher quantity will be demanded at the lower price let see into the graph this the normal demand curve this much quantity is demanded at this price let say the price falls to P1 the quantity demand will now increase to Q1 you can see that quantity demand increase with the fall in price. The price has fallen the quantity demanded increase. This movement along the curve is expansion of quantity demand, whenever there is change in quantity demanded not due to other factors but only due to price is called as change in quantity demanded and when quantity demanded increases because of fall in price we call it expansion. Now let’s discuss what is contraction again lest assume this a normal demand curve. This the quantity demanded and this is the price now what happen as the price increases the quantity demand will shrinks when price goes up lesser number of that commodity is demanded less number of unit of that commodity is demanded. So what happen is quantity demanded falls with an increase in price and pretend to move along the cure in the upward direction. When we move in the upward direction we call it contraction, contraction is quantity demanded because the quantity of that commodity is demanded in lesser amount Now let’s discuss what increase in demand. Increase in demand means where there is a change in demand where the quantity demanded of that commodity has change not due to price but due to other factors. Let’s say change in income level. As we low that income will affect the quantity demand as income level rises demand changes as income level fall demand changes that is it goes down. Likewise when the price of substitute goods up demand goes up and the price of substitute good goes down demand also goes down again when the price of complimentary goods goes up the demand fall and when price of complementary good falls down demand increases so there is a relation between demand and income level or the price of substitute good and complimentary goods. Now because of this reason the demand curve is not able to move along the curve it all together shifts let see how again this is the normal demand curve this the quantity demanded in the market and this is the price at which this commodity is demanded now demand changes because of other factors not because of price so here we keep the price constant let say demand increases to q1 now please not there is no change in price even though the quantity demanded has increase this will shift the demand curve from dd to d1d1 we cannot go along the same curve this process is outward precession of the curve and when the curve shift outward or the right ward then we call it increase in demand this is increase in demand. Please not quantity demand has change because of other factors let says the income level has increase or the price of substitute goods has gone up this leads to an increase in demand. likewise lest draw and x axis and y axis this the normal demand curve this is the quantity demanded at this prices now what happen is many times income level of people falls let say we are going through recession period what happen during recession time the income level of the people comes down along with the income level of people as long as the income level of people comes down the consumption patter of the people also shrinks they tends to consume less number of goods or commodities so their consumption reduces fall from q to Q2 but price remain the same. The price again remains the same because the change has been brought about by the change in income level not because of prices this leads to an inward projection of the curve because no more on the singer on this equilibrium point or new equilibrium point will be not on the curve DD but inside the curve and this lead to form a new curve D1D1 here we can see that the curve had move in that is there is an inward movement in the curve there is an inward movement in the curve or we can say that the curve has shifted left ward or to the left side or toward the origin this is because reduction in commodity consume or purchase or demanded is called decreased in demand. Again please note expansion and contraction are due to change in price where other goods remain constant. Expansion is because of fall in price contraction is because of rise in price. However, Increase and decrease are not related to price but are related to other factors that demand changes because of change in other factors. Let’s discuss the types of demand in this we have price demand, income demand, cross demand, indirect or drive demand, direct demand, joint demand, and composite demand. We know that the demand of X is depend on the price of X good, price of related goods, and income of the consumer, taste and preference of the consumer. Taste and preference of the consumer cannot be measured quantitatively so if we exclude this and we discuss the other determinants of demand that is price of commodity X price of related good, and the income of the consumer. We have three types of demand it is related to this three determinants that is price demand, cross demand which is related to the price of related goods and the income demand to the income of the consumer. Price tell you the relationship between price of the commodity X and demand of the commodity X other things are kept constant. What are the other thing we talk here that is income of the consumer taste and preference of the consumer and price of related goods. Similarly we talk of the income demand. Quantity demand of a commodity in relation to the income of the consumer that is other thing being equal it shows the relationship between the income of the consumer and the demand of a commodity. If shows how demand changes as the income of the consumer change and other thing here means price of X goods, price of related goods and taste and preference of consumer remain constant. Other thing remain constant in cross demand quantity demand is the function of related goods. When the demand of another related goods changes with the change in the price of commodity this case will be cross demand. We are talking of the demand of commodity Y which can be a substitute or complementary for commodity x. assume that demand for commodity y the demand for related good that is Y is related to the price of commodity X what are the other thing which are kept here constant are income of the consumer, taste and preference of the consumer and price of commodity Y. price of commodity Y is kept constant here because we are taking about the demand of commodity Y. Let us move to another type of demand direct and indirect demand. Is based on the dependency on other product first we will discuss direct demand. The demand for the product is not associate with the demand of other product that is the demand for the commodity is set to be direct when it satisfy your want directly it does not depend on the demand of other goods for example when you talk of food it will satisfy your hunger directly. When you demand food so it is directly satisfy your wants. Direct demand satisfy your want directly and they do not depend on the demand of the other goods. Now when we talk about the indirect demand of derived demand. What is means this depends on the demand of other products or parent product you demand this product not for it won sake but for the sake of the product that you want for example labour when you demand labour you demand to produce certain commodities say that commodity is shoe so when you demand labour it is the derive demand because you demand labour because you want shoe. So all the factor of production that is land, raw material, labour and capital all this are the derived demand. Why because you demand this in order to produce some other goods. Let’s discuss composite demand. When a commodity put to several uses it is said to poses the composite demand for example demand for steel is a composite demand because steel can be used for manufacturing machines, can be used as a tools can be used in cars so this commodity steel can be put to several uses therefore it is said to have a composite demand. Next comes joint demand when the demand for one commodity itself mean the demand for the other commodity for example first in finished product like bread there are many thing service of flour milk, oven fuel, so we need all this thing in order to make bread so the demand for bread means the demand for other commodity therefore it the demand call the joint demand Hope you understand the law of demand expansion and contraction of demand, increase and decrease in demand, types of demand next lecture we will discuss elasticity of demand and types of elasticity of demand. 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