ICS FA ICom Notes Class XI Principles of Economics Demand Curve
Demand Curve
Demand curve is a geometrical presentation of the demand schedule. Demand schedule is a table and demand curve is based on this table. Thus one represents the other. The above schedule can be stated in terms of demand curve as:
Changes in Demand
According to the law of demand the demand for a product increases due to change in its price. But there are certain other reasons that influence the demand. Some of them are as follows:
1. Changes in the Taste and Fashion
The changes in the taste and fashion influence the demand to a great extant. Actually a human being psychologically want continuous change in his life style so that he get maximum satisfaction .To achieve his state of satisfaction he do not consider whatever the price of commodity he has to pay. Even if the price is high and the commodity is in high fashion or matches exactly his taste he will ultimately go for purchasing it.
2. Change in climatic conditions
The climatic conditions tend to increase or decrease the demand for a product. In winter there a great demand for warm clothing and in summer there a demand for electric fans and cold rinks and the marketers do not usually charge , less prices in these seasons in order to sell their products.
3. Change in Population
A change in the composition of the population will also affect demand. Influx of new people will create a demand for the good; they are in the habit of consuming. If the population of a country is rising, the over all demands of the people increase even at the same high price.
4. Change in the Amount of Money
Inflation also has a significant bearing on the demands of the people. When there is inflation it causes a great deal in demand, which leads to an increase in prices. Similarly if the amount of money is decreased the demand goes down even if there is no change in its price.
5. Change in Methods of Production
Changes in techniques and in the use of factors will affect the demand pattern of those factors as in the case of capital equipment and labour or chemicals.
6. Changes in the Price of the Substitutes
If the prices of the substitutes are varied their demand will directly be affected. If the price of any commodity whose substitute is also available in the market is decreased its demand will be increased whereas the demand for its substitute despite of unaltered price will fall down.
7. Changes in the Wealth Distribution
The distribution of wealth also affects the demand for a product. If the wealth is distributed evenly the goods demanded by people the have acquired more wealth will increase and demand of the people who have lost wealth will decrease.
8. Anticipated Political or Price Change
Some time norms and general speculation about tax changes war etc or of future shortages or abundance causes the present pattern of demand to change.
9. Changes in Conditions of Trade
The conditions of trade are closely related with the demand of the product. Demand for every thing is greater in a boom though the prices are rising. Opposite is the case when there is depression
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