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1. Price of the product 

2. Price of related goods 

3. Income of consumers and 

4. Tastes and preferences of consumers.

Qd is dependent variable, P is independent variable, 20 is constant, -2 is coefficient of ‘p’

Individual Demand:

1. Individual demand refers to total quantities of a commodity demanded by an individual or household at a given price during a period of time. 

2. It is basically micro or narrow concept and not very useful in framing business, production and price policies. 

3. Individual demand depend on the price of goods, disposable income credit facilities, taste, preference, etc. 

4. It can be presented with the help of individual demand schedule and individual demand curve.

Market Demand :

1. Market demand refers to the total quantities of a commodity demanded by all the individuals in the market at a given price, during a given period of time. 

2. It is a macro or broader concept and is very useful in framing, business, production and price policies. Even the law of demand is based on market demand. 

3. Market demand depends on size of population, social customs, distribution of income, etc. 

4. It can be presented with the help of market demand schedule and market demand curve.

If change in price and change in expenditure are in the same direction, the price elasticity of demand is less than one, i.e., less elastic demand. (P_ed <1).

The Demand Function refers to a functional relationship between quantities demanded and its determinants. 

It can be expressed as follows:

Qd = f(P, Pr ,Y, T,………….. ). Where Qd stands for Quantity demanded, f is function, P is Price of commodity, Pr – price of related/substitutes, Y is income of consumers, T is tastes and preferences of consumers.

It may be defined as the proportionate change in the quantity demanded of a particular commodity in response to a change in the price of another related commodity.

FALSE 

The law of demand was postulated by Dr. Alfred Marshall in his book ‘Principles of Economics’. According to the Law of Demand, other things remaining constant, as the price of a commodity increase, the quantity demanded of it falls and vice-versa.

Demand for a commodity refers to the quantity of a commodity that a consumer is willing and is able to purchase at a particular price at any particular point in time. For example, a consumer demands 2 kg sugar at Rs 10 per kg and 3 kg sugar at Rs 8 per kg.

Correct option: (2) a, b and d

Indirect demand is also known as derived demand.

Explanation: 

When goods are demanded so that they can be used in the production of some other commodity, it is called indirect or derived demand. In other words, such demand is derived as a result of the demand/consumption of some other commodity. Cement, for example, has indirect/derived demand as a result of demand for construction of buildings.

Correct option: (4) a, c and d

Direct Demand:

1. Demand for consumer goods is direct because it satisfies our wants directly. 

2. Demand for consumers goods are directly for consumption. 

3. Direct demand comes from consumers or household sector. 

4. Direct demand depends on price, income, taste, habits, etc. of consumers. 

5. E.g. all consumer goods like books, furniture, T.V., tea, etc. have direct demand.

Derived Demand / Indirect Demand:

1. Demand for factors of production like land, labour, capital is derived as they satisfy our wants indirectly 

2. Demand for factors of production are for further production. 

3. Derived demand comes from producers or firms. 

4. Derived demand depends on demand for final goods and services.

5. E.g. when demand for cotton shirt will increase, demand for raw cotton increases.

(iii) Both (A) and (R) is true and (R) is the correct explanation of (A).

Yes, I agree with this statement.

1. Direct Demand : When a commodity satisfies the want of a consumer directly, it is said to have direct demand. Demand for consumer goods like food, clothes, sugar, vegetables, milk, etc.

2. Indirect Demand : It refers to demand for goods which are required for further production. It is also called as derived demand. Demand for factors of production like land, labour, capital, etc. 

3. Joint or Complementary Demand : When two or more goods are demanded at a same time to satisfy single want, it is known as Joint or Complementary Demand. E.g. car and fuel, pen and ink, mobile phone and sim card, etc. 

4. Composite Demand : When one commodity can be utilize for several needs or multiple uses, it is known as composite demand. E.g. electricity, steel, coal, etc.

5. Competitive Demand : It is demand for those goods which are substitute for each other. E.g. tea or coffee, sugar or jaggery, pepsi or Thumsup, etc.

Yes, I agree with this statement.

Assumptions to the Law of Demand: 

• Prices of Substitute goods remain constant : The price of substitute goods should remain unchanged, as change in the price will affect the demand for the commodity.
• Prices of Complementary goods remains constant : A change in the price of one good will affect the demand for other, thus the prices of complementary goods should remain unchanged.
• No Expectation about future changes in prices : The consumers do not expect any significance rise or fall in the future prices.
• No change in size of Population : The size of population, gender ratio and age composition are assumed to remain constant. As such changes are sure to affect demand.
• No change in Taxation Policy : The level of direct and indirect tax imposed by the government on the income and goods should remain constant.
• Constant Level of Income : Consumer’s income must remain unchanged because if income increases, consumer may buy more even at a higher price not following the law of demand.
• No Change in Tastes, Habits, Preference, Fashions, etc. : If the taste changes then the consumers preference will also change which will affect the demand. When commodities are out of fashion, then demand will be low even at a lower price.

Assumptions to the Law of Demand:

• Prices of Substitute goods remain constant : The price of substitute goods should remain unchanged, as change in the price will affect the demand for the commodity.
• Prices of Complementary goods remains constant : A change in the price of one good will affect the demand for other, thus the prices of complementary goods should remain unchanged.
• No Expectation about future changes in prices : The consumers do not expect any significance rise or fall in the future prices.
• No change in size of Population : The size of population, gender ratio and age composition are assumed to remain constant. As such changes are sure to affect demand.
• No change in Taxation Policy : The level of direct and indirect tax imposed by the government on the income and goods should remain constant.
• Constant Level of Income : Consumer’s income must remain unchanged because if income increases, consumer may buy more even at a higher price not following the law of demand.
• No Change in Tastes, Habits, Preference, Fashions, etc. : If the taste changes then the consumers preference will also change which will affect the demand. When commodities are out of fashion, then demand will be low even at a lower price

The law of demand is based on the following assumptions:

1. Size of the population remains the same. 

2. Income of the consumer remains unchanged. 

3. Prices of related goods remain unchanged. 

4. Consumer’s tastes and preferences remain unchanged. 

5. Government’s policies remain unchanged. 

6. There is no change in the expectations about the future.

Correct option: (i) (A) is true but (R) is false.

When the price of petrol goes up, demand of cars will fall.

Explanation: 

Cars and petrol are complementary goods, i.e., goods that are demanded together. In such cases, a rise in the price of one leads to a fall in the demand for the other good. Thus, a rise in the price of petrol will lead to a fall in the demand for cars.

Market demand is an aggregate of purchasing by all buyers.

Explanation: 

Market demand is the aggregate (total) of the individual demands for a product by all consumers in the market at different prices.

Individual demand is the demand of a commodity by a particular consumer. It represents various quantities of a particular commodity that a consumer (single buyer) is willing to purchase at different possible prices at a particular point in time.

(i) Nature of the Commodity: In case of comforts and luxuries, demand tends to be elastic because people buy those more only when their prices are low. e.g. TV sets.

In case of necessaries, demand is inelastic because whatever may be the price, people have to buy and use them. e.g. Rice.

(ii) Existence of Substitutes: If a product has substitutes, demand tends to become elastic because people compare tho prices of substitute goods and cheaper products are purchased, eg. Blades, Soaps.

If a product has no substitutes, demand becomes inelastic because in that case whatever may be the price, people have to buy them. e.g. Onion.

(iii) Durability of the commodity: If a product is perishable or non durable, demand tends to be inelastic, because people buy them again and again. If a product is durable, demand tends to be elastic because people buy them occasionally.

(iv) Number of uses of a commodity: If a product has multiple uses, demand tends to become elastic because, with a fall in price, the same product can be used for many purposes, e.g. Electricity, coal etc.

If a product has only one use, in that case demand becomes inelastic because people have to buy them for a specific single purpose whatever may be the price, e.g. All eatables, seeds, fertilizers, pesticides etc.

(v) Possibility of postponing the use of product: If there is a possibility to postpone the use of particular product, demand tends to become elastic, e.g. Buying a scooter, motorcycle, TV sets etc. people generally buy these articles when they are cheaper.

If it is not possible to postpone, demand tends to become inelastic. In this case, whatever may be the price, people have to buy them. e.g. Medicine.

(vi) Level of income of the people: Generally speaking, demand will be elastic in case of the poor people because even a small change in price will affect the demand for various products.

On the other hand demand will be inelastic in case of rich people because they are ready to spend any amount on buying a product.

(vii) Habits: If people are not habituated for the use of certain products, then demand tends to be elastic. If products are cheaper, they buy more and if they become costly, they may buy less or may not buy them at all.

When people are habituated for the use of a particular commodity, they do not care for price changes over a certain range, e.g. Cigarettes,, liquor etc. In that case, demand tends to become inelastic.

(viii) Complementary goods: Goods which are jointly demanded are inelastic in nature, e.g., ink and pens, vehicles and petrol etc. This is because, if people buy one product, they have to buy the supplementary products also without which they cannot make use of the first item.

Demand tends to be elastic in case of independent products, e.g., biscuits, chocolates, ice-creams etc. In this case, consumption or use of a product is not linked to any other products. Hence, they may or may not buy a product.

Qd = 30 – 2p; If price is Rs. 10, 

Qd = 30 – 2(10) 

= 30 – 20 

= 10.

The quantity demanded of onion is 10 kgs.

The market demand function Qd = Qd₁+ Qd₂ 

Therefore, 

Qd = 15 – 2p + 25 – 3p 

Qd = 40 – 5p 

When the price is ‘0’, quantity demanded will be 

Qd = 40 – 5p 

= 40 – 5(0) 

=40.

When the quantity demanded is ‘0’, the price will be 

0 = 40 – 5p 

40 – 5p = 0 

40 = 5p P 

= \(\frac{40}{5}\)

= P = 8 

So the Market demand is ‘40’ and Market price is Rs.8.

(1)-(c), (2)-(d), (3)-(b), (4)-(a).

The demand curve slopes downwards because of price effect, substitution effect, income effect and operation of law of diminishing marginal utility.

The movements along the demand curve occur on the basis of the inverse relationship between price and quantities demanded. When the price is less, demand will be more and when the price is more, demand will be less. So, any changes in price lead to movement on the demand line.

Yes, demand for a commodity is influenced by a number of factors. Some of the factors that influence the demand for a commodity are:

1. Price of the commodity- Demand for a commodity shares a negative relationship with price. As the price of the commodity increases, the demand for it falls and vice versa. 

2. Income of the consumers- For normal goods, demand for a good shares a positive relationship with income of the consumer. As the income of the consumer increases, the demand for normal goods increases and vice versa 

3. Price of related goods (substitute and complementary goods)- Substitute goods are the goods that are consumed in place of each other. In case of such goods as the price of one good increases, the consumer shifts its demand towards the other good. On the other hand, complementary goods are the goods that are consumed together for the satisfaction of wants. In case f such goods as the price of one good increases the demand for other good falls and vice versa. 

4. Tastes and preferences of consumers- As the consumers develop a taste and preference for a commodity the demand for it increases. On the other hand, if the taste and preference of consumers move away from a commodity, the demand for good falls. 

5. Expectations about future prices- If the consumers expect the prices to rise in future, the demand for the good increases at present. On the other hand, if the consumers expect the price to fall in future, they postpone their demand for future. 

6. Size of the population- Greater the size of population, greater is the total number of consumers, greater is the demand for the commodity and vice versa.

In order to represent the inverse relationship between price and demand, the demand curve must slope downwards. Apart from this basic reason, there are many other factors which make the demand curve to slope downwards. 

They are as follows:

(a) Operation of the law of Diminishing Marginal Utility: The law of DMU states that as the consumer acquires larger quantities of any commodity, the additional units of the same product will give him lower utility, and as such he gets a less value for the additional under The law of demand states that in order to induce the consumer to buy more less price must be offered.

(b) Operation of the law of Equi – Marginal Utility: This law states that utility of the product must be equal to its price in general. As price falls, the equality between the two will be disturbed and in order to re-establish this equality the consumer buys more. Now utility comes to the level of reduced price. Hence, as price falls, a consumer buys more.

(c) Income effect: A change in demand as a result of change in income is called as Income effect. As price falls, the real income of the consumer increases. With this increased real income (gets more purchasing power with more money in his hands), he buys more.

(d) Substitution effect: When the price of one product falls, it becomes cheaper when compared to other products ’ for which price remains constant. Hence, a consumer will substitute low priced product to high priced product. The result is that demand for a product rises as price falls.

(e) Price Effect: When the change in quantities demanded is caused by the change in price, it is called as Price effect. When the price of a product falls, it becomes cheaper and consumer buys more of that and vice versa. Hence, the demand curve always slopes downwards from left to right.

No, I do not agree with this statement.

Determinants of Demand :

1. Price of Complementary Goods : Demand changes with changes in price of complementary goods like car and petrol, etc. 

2. Advertisement : Effective advertisement and sales promotion will lead to greater demand of product. E.g. cosmetics, toothbrush, etc. 

3. Price : Demand for a commodity is mainly influenced by its price. Normally at a higher price the demand is less and at a lower price it is more. Thus, demand varies inversely with price of a commodity. 

4. Taste, Habits and Fashions : Habits influence market demand. If people habituated to the consumption of certain goods they will not give up such habits easily. E.g. demand for liquor, cigarettes, etc. Sometimes fashion change attitude and preference of people which in turn changes market demand.

5. Income: Income determines the purchasing power. Rise in income will lead to a rise in demand of a commodity and fall in income will lead to a fall in demand of a commodity. 

6. Other Factors : 

(a) Climatic condition, 

(b) Changes in technology, 

(c) Government policy, 

(d) Customs and traditions, etc.

FALSE 

The demand curve is the graphical representation of the relationship between the demand for a good and its price for a given income, price of related goods, tastes and preferences. This curve slopes downwards from left to right because of the negative relationship between the price of the commodity and its demand. In the diagram below, DD is the demand curve.

Yes, I agree with this statement. 

Reasons justifying downwards sloping demand curve are as follows :

• The law of Diminishing Marginal Utility : Marginal utility goes on diminishing when there is increase in the stock of commodity and consumer tends to buy more when price falls and vice-versa. 
• Income Effects : Whenever there is a fall in price of a commodity, purchasing power of a consumer gets increased, which enables him to buy more of that commodity.
• Substitution Effect : When price of commodity rises consumer tends to buy more of cheaper substitute goods and less of the commodity whose price has increased.
• Multi-purpose Uses : When a commodity can be used for satisfying multiple needs, its demand will rise with a fall in its price and vice-versa.
• New Consumers : When there is fall in price of a commodity, a new consumer class buy the commodity as they can afford it. Thus total demand for commodity increases with fall in price. 

No, the law of demand has certain exceptions. Some of such exceptions are listed below:

1. Giffen goods: These are extremely inferior goods. With a fall in price of the Giffen goods, their demand falls. 

2. Emergency situations: In case of emergency situations such as war, curfew, natural calamities etc consumers purchase the commodities even at a higher price. 

3. Articles of distinction: Articles such as diamonds, jewellery, etc. are accorded high prestige and status as these are very costly. Such articles enjoy a high demand because of their high price. Consequently, the demand for such goods share a positive relationship with price.

(1). Car, Gold, Diamond, etc.

(2). Cigarette, Tea, Drugs, Chocolates, etc.

(3). Godrej Lockers, Levis Jeans, Sony T.V. etc.

(iii) Both (A) and (R) is true and (R) is the correct explanation of (A).

(iii) Both (A) and (R) is true and (R) is the correct explanation of (A).

No, I do not agree with the given statement. This is because there are various factors that determine demand other than price.

Reason : 

The following are a few determinants: Income of the consumer – Change in the income of the consumer also affects the market demand for goods. The effect of the change in income on the market demand depends on the type of the good.

Type of Good – The market demand for normal goods shares a positive relationship with the consumer’s income. The market demand for inferior goods (such as coarse cereals) has a negative relationship with the consumer’s income.

The market demand for Giffen goods also has a negative relationship with the income. Consumer’s tastes and preferences – Consumers’ tastes and preferences highly influence the demand for goods. Other things being constant, if all consumers prefer a commodity over another, then the market demand for that commodity increases and vice versa.

Population size – The market demand for a commodity is also affected by the population size. Other things being equal, an increase in the population size increases the market demand for a commodity and vice-versa. This is because with the change in population size, the number of consumers in the market changes.

No, I do not agree with this statement.

OR

Yes, I agree with this statement.

Reasons justifying downwards sloping demand curve are as follows:

• The law of Diminishing Marginal Utility: Marginal utility goes on diminishing when there is increase in the stock of commodity and consumer tends to buy more when price falls and vice-versa.
• Income Effects : Whenever there is a fall in price of a commodity, purchasing power of a consumer gets increased, which enables him to buy more of that commodity.
• Substitution Effect : When price of commodity rises consumer tends to buy more of cheaper substitute goods and less of the commodity whose price has increased.
• Multi-purpose Uses : When a commodity can be used for satisfying multiple needs, its demand will rise with a fall in its price and vice-versa.
• New Consumers : When there is fall in price of a commodity, a new consumer class buy the commodity as they can afford it.

Thus total demand for commodity increases with fall in price.

When price of commodity rises, the demand for it contracts.

Explanation: 

When the price of a commodity increases, other things are kept constant, the demand for the commodity falls/contracts and vice versa.

Correct option: (2) a, b and c

No, I do not agree with this statement. 

There are many other determinants of demand beside price, like:

1. Income: Income determines the purchasing power. Rise in income will lead to a rise in demand of a commodity and fall in income will lead to a fall in demand of a commodity.

2. Price of Substitute Goods : Demand for cheaper substitute goods will rise when there is fall in price of such goods. E.g. when sugar price rises, then the demand for jaggery will rise. 

3. Price : Demand for a commodity is mainly influenced by its price. Normally at a higher price the demand is less and at a lower price it is more. Thus, demand varies inversely with price of a commodity. 

4. Nature of Product: Under necessary and unavailable circumstances the demand of a commodity will continue to be same irrespective of the corresponding price. E.g. medicine to control blood-pressure. 

5. Size of Population: Demand for commodity depends upon size and composition of population like age structure, gender ratio which influence demand for certain goods. E.g. larger the child population, more will be the demand for toys, chocolates, etc.

Option : (b) inverse

Option : (a) D = f(Px)

Option : (d) contraction in demand

(1) Expansion or Extension of Demand 

(2) Demand Curve 

(3) Composite Demand 

(4) Increase in Demand 

(5) Demand

Correct option: (3) a, b, c and d

Wrong pair : Competitive demand – Milk- 5 Sugar