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Karnataka Class 12 Commerce Economics Chapter 3 Demand Analysis Complete Details

Karnataka Class 12 Commerce Economics Chapter 3 Demand Analysis :  Cakart team members provides here Karnataka Class 12 Commerce Economics Chapter 3 Demand Analysis Complete Details  and other CBSE Class 12 Commerce Mathematics  Complete Notes in pdf format. We provides you direct link for downloading Karnataka Class 12 Commerce Economics Chapter 3 Demand Analysis Complete notes in pdf format. Download Karnataka Class 12 Commerce Economics Chapter 3 Demand Analysis Complete Notes Here and read well.

Karnataka Class 12 Commerce Economics Chapter 3 Demand Analysis Complete Details

Karnataka Class 12 Commerce Economics Chapter 3 Demand Analysis : Demand analysis is a research done to estimate or find out the customer demand for a product or service in a particular market. Demand analysis is one of the important consideration for a variety of business decisions like determining sales forecasting, pricing products/services, marketing and advertisement spending, manufacturing decisions, expansion planning etc. Demand analysis covers both future and retrospective analysis so that they can analyse the demand better and understand the product/service’s past success and failure too. Karnataka Class 12 Commerce Economics Chapter 3 Demand Analysis main topics complete details are given here :

1) Karnataka Class 12 Commerce Economics Demand Meaning And Its Determinants Notes :

Karnataka Class 12 Commerce Economics Chapter 3 Demand Analysis : Demand is the underlying force that drives everything in the economy. Fortunately for economics, people are never satisfied. They always want more. This drives economic growth and expansion. Without demand, no business would ever bother producing anything.  Demand is an economic principle that describes a consumer’s desire and willingness to pay a price for a specific good or service. Holding all other factors constant, an increase in the price of a good or service will decrease demand, and vice versa. Think of demand as your willingness to go out and buy a certain product. For example, market demand is the total of what everybody in the market wants.

Download here Karnataka Class 12 Commerce Economics Demand Meaning And Its Determinants Notes In PDF Format

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2) Karnataka Class 12 Commerce Economics Demand Function Complete Notes :

Karnataka Class 12 Commerce Economics Chapter 3 Demand Analysis : A demand function that represents the behavior of buyers, can be constructed for an individual or a group of buyers in a market. The market demand function is the horizontal summation of the individuals’ demand functions. In models of firm behavior, the demand for a firm’s product can be constructed.

The nature of the “demand function” depends on the nature of the good considered and the relationship being modeled. In most cases the demand relationship is based on an inverse or negative relationship between the price and quantity of a good purchased. The demand for purely competitive firm’s output is usually depicted as horizontal (or perfectly elastic). In rare cases, under extreme conditions, a “Giffen good” may result in a positively sloped demand function. These Giffen goods rarely occur.

It is important to identify the nature of the “demand function” being considered.

Individual Demand Function

The behavior of a buyer is influenced by many factors; the price of the good, the prices of related goods (compliments and substitutes), incomes of the buyer, the tastes and preferences of the buyer, the period of time and a variety of other possible variables. The quantity that a buyer is willing and able to purchase is a function of these variables.

An individual’s demand function for a good (Good X) might be written:

QX = fX(PX, Prelated goods, income (M), preferences, . . . )

  • QX = the quantity of good X
  • PX = the price of good X
  • Prelated goods = the prices of compliments or substitutes
  • Income (M) = the income of the buyers
  • Preferences = the preferences or tastes of the buyers

The demand function is a model that “explains” the change in the dependent variable (quantity of the good X purchased by the buyer) “caused” by a change in each of the independent variables. Since all the independent variable may change at the same time it is useful to isolate the effects of a change in each of the independent variables. To represent the demand relationship graphically, the effects of a change in PX on the QXare shown. The other variables, (Prelated goods, M, preferences, . . . ) are held constant. Figure III.A.1 shows the graphical representation of demand. Since (Prelated goods, M, preferences, . . . ) are held constant, the demand function in the graph shows a relationship between PX and QX in a given unit of time (ut).

Figure III.A.1

The demand function can be viewed from two perspectives. The demand is usually defined as a schedule of quantities that buyers are willing and able to purchase at a schedule of prices in a given time interval (ut), ceteris paribus.

QX = f(PX), given incomes, price of related goods, preferences, etc.

Demand can also be perceived as the maximum prices buyers are willing and able to pay for each unit of output, ceteris paribus.

PX = f(QX), given incomes, price of related goods, preferences, etc.

It is important to remember that the demand function is usually thought of as Q = f(P) but the graph is drawn with quantity on the X-axis and price on the Y-axis. While demand is frequently stated Q = f(P), remember that the graph and calculation of total revenue (TR) and marginal revenue (MR) are calculated on the basis of a change in quantity (Q). TR = f(Q) The calculation of “elasticity” is based on a change in quantity (Q) caused by a change in the price (P). It is important to clarify which variable is independent and which is dependent in a particular concept.

Market Demand Function

When property rights are nonattenuated (exclusive, enforceable and transferable) the individual’s demand functions can be summed horizontally to obtain the market demand function.

Figure III.A.2

In Figure III.A.2 and Table III.A.2, a market demand function is constructed from the behavior of three people (the participants in a very small market. At a price of P1, Ann will voluntarily buy 2 units of the good based on her preferences, income and the prices of related goods. Bob and Cathy buys 3 units each. Their demand functions are represented by DA, DB and DC in Figure III.A.2. The total amount demanded by the three individuals at P1 is 8 units (2+3+3). At a higher price each buys a smaller quantity. The demand functions can be summed horizontally if the property rights to the good are exclusive; Ann’s consumption of a unit precludes Bob or Cathy from the consumption of that good. In the case of public (or collective) goods, the consumption of national defense by one person (they are protected) does not preclude others from the same good.

The behavior of a buyer was represented by the function:

QX = fX(PX, Prelated goods, income (M), preferences, . . . ).

For the market the demand function can be represented by adding the number of buyers (#B, or population), QX = fX(PX, Prelated goods, income (M), preferences, . . . #B), where #B represents the number of buyers. Using ceteris paribus the market demand may be stated

QX = f(PX), given incomes, price of related goods, preferences, #B etc.

Change in Quantity Demand

When demand is stated Q = f(P) ceteris paribus, a change in the price of the good causes a “change in quantity demanded.” The buyers respond to a higher (lower) price by purchasing a smaller (larger) quantity. Demand is an inverse relationship between price and quantity demanded. Only in unusual circumstances (a highly inferior good, a Giffen good) may a demand function have a positive relationship.

A change in quantity demanded is a movement along a demand function caused by a change in price while other variables (incomes, prices of related goods, preferences, number of buyers, etc) are held constant. A change in quantity demanded is shown in Figure III.A.3.

Figure III.A.3

Change in Demand

A change in demand is a “shift” or movement of the demand function. A shift of the demand function can be caused by a change in:

  • incomes
  • the prices of related goods
  • preferences
  • the number of buyers.
  • Etc . . .

A “change in demand” is shown in Figure III.A.4. Given the original demand (Demand), 10 units will be purchased at a price of $5. An increase in demand (DINCREASE) is to the right and at every price a larger quantity will be purchased. At $5, eighteen units are purchased. A decrease in demand is a shift to the left. At a price of $5 only 4 units are purchased. A smaller quantity will be bought at each price.

Download here Karnataka Class 12 Commerce Economics Demand Function Complete Notes In PDF Format. 

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3) Karnataka Class 12 Commerce Economics Law Of Demand Complete Notes :

Karnataka Class 12 Commerce Economics Chapter 3 Demand Analysis : The law of demand summarizes the effect price changes have on consumer behavior. For example, a consumer will purchase more pizzas if the price of pizza falls. The opposite is true if the price of pizza increases. John might demand 10 pizzas if they cost $10 each, but only 7 pizzas if the price rises to $12, and only 4 pizzas if the price rises to $20.

The law of demand is one of the most fundamental concepts in economics. It works with the law of supply to explain how market economies allocate resources and determine the prices of goods and services.

Key points

  • The law of demand states that a higher price leads to a lower quantity demanded and that a lower price leads to a higher quantity demanded.
  • Demand curves and demand schedules are tools used to summarize the relationship between demand and price.

Demand for goods and services

Karnataka Class 12 Commerce Economics Chapter 3 Demand Analysis : Economists use the term demand to refer to the amount of some good or service consumers are willing and able to purchase at each price. Demand is based on needs and wants—a consumer may be able to differentiate between a need and a want, but from an economist’s perspective they are the same thing. Demand is also based on ability to pay. If you cannot pay, you have no effective demand.
What a buyer pays for a unit of the specific good or service is called price. The total number of units purchased at that price is called the quantity demanded. A rise in price of a good or service almost always decreases the quantity demanded of that good or service. Conversely, a fall in price will increase the quantity demanded. When the price of a gallon of gasoline goes up, for example, people look for ways to reduce their consumption by combining several errands, commuting by carpool or mass transit, or taking weekend or vacation trips closer to home. Economists call this inverse relationship between price and quantity demanded the law of demand. The law of demand assumes that all other variables that affect demand are held constant.

4) Karnataka Class 12 Commerce Economics Elasticity Of Demand Complete Notes :

Karnataka Class 12 Commerce Economics Chapter 3 Demand Analysis : The elasticity of demand (Ed), also referred to as the price elasticity of demand, measures how responsive demand is to changes in a price of a given good. More precisely, it is the percent change in quantity demanded relative to a one percent change in price, holding all else constant (ceteris paribus). Demand of goods can be classified as either perfectly elastic, elastic, unitary elastic, inelastic, or perfectly inelastic based on the elasticity of demand. This table shows the values of elasticity of demand that correspond to the different categories.

Download here Karnataka Class 12 Commerce Economics Elasticity Of Demand Complete Notes In PDF Format

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Karnataka Class 12 Commerce Economics Chapter 3 Demand Analysis Complete Details

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