Economics - Session3

DEMAND

The other non-price determinants of Demand are

Number of buyers
Consumer Income
Prics of related goods
Tastes
Expectations

Giffen goods - In a broader sense, goods which do not follow law of demand are giffen goods. In a narrower sense, giffen goods are those goods for which if price falls, demand also falls other things remaining constant.

Giffen goods are named after Sir Robert Giffin. Example of a giffen good may be an expensive brand of liquour. If the price of the brand falls, it is no longer perceived as an exclusive or a high status drink, so its demand falls.
For more information on giffen goods, please visit http://en.wikipedia.org/wiki/Giffen_goods

Normal goods - Normal goods are those for which demand increases when income increases. For eaxample demand for cars increases when one's income increases.
For more information visit http://en.wikipedia.org/wiki/Normal_good

Inferior goods - Goods for which demand decreases when income increases are inferior goods. For example if income increases, demand for two wheeler goes down.
For more information visit http://en.wikipedia.org/wiki/Inferior_good

NOTE: For our exam purpose, if nothing is specified we should assume that the good is a normal good.

1. If price changes movement is along the demand curve. Here the change is of quantity demanded
2. If other non-price determinant thing changes, ther is shift in demand curve.Here the demand changes.

Substitute

Let's say that the price of burger is decreasing, then the demand of burger will increase. When the demand for burger increases people will consume more burger and less hotdog. So the demand for Hot dog falls. In this scenario, burger is a substitue for hot dog.

An increase in price for one kind of good will result in an increase in demand for its substitute good and a decrease in price will result in decrease in demand for its substitute goods.

Other examples of substitute goods are margarine and butter, petroleum and natural gas

Compliments- TO BE DEVELOPED(TBD)

SUPPLY

- TO BE DEVELOPED(TBD)

DEMAND AND SUPPLY

- TO BE DEVELOPED(TBD)