So first of all; what do you understand by
demand?
Demand refers to the quantity of a product
that consumers are willing and able to buy
at different prices over a given period of
time assuming all other things to remain constant.
This is the definition of demand.
Now; demand is effective whenever there is
a desire to have the good backed by the ability
to pay.
So when we have the willingness to buy the
product and we have the ability to buy the
product then we say that demand will be taking
place.
So if we don't have the willingness to buy
the product or we do not have the ability
to buy the product then we cannot say that
there will be demand.
So demand will only be taking place whenever
there is the willingness to have the product
backed by the ability to pay; then we say
that there will be demand.
And we have to know that the demand curve
is more likely to be downward sloping from
left to right because there exist an inverse
relationship between price and quantity demanded.
When price increases, quantity demanded falls
and when price falls, quantity demanded increases.
The law of demand states that ''ceteris paribus
more will be demanded at lower prices than
at higher prices''.
Consumers are more willing to buy more at
a lower price than at a higher price.
And you have to know that this indicates the
law of demand.
So when we talk about elasticity of demand,
we have to know that when demand is more likely
to be inelastic then a price rise is more
likely to lead to a rise in revenue.
This states the price elasticity of demand.
So we have done this in the previous session.
So this is something which is very essential
for you to know about.
So when demand is inelastic, we say that a
price rise is more likely to lead to a rise
in revenue.
This is because there exist a direct relationship
between price and total revenue.
When price increases, total revenue also increases
and when price falls, total revenue also falls.
Now; when we speak about elastic demand, elastic
demand means that if there is a fall in price
then in that case total revenue will increase.
This is because there exist an inverse relationship
between price and total revenue when demand
is more likely to be elastic.
When price increases, total revenue falls
and when demand is elastic.
And when price falls, total revenue increases
when demand is elastic...okay....now in the
case for a giffen good ....you have to understand
one thing.
The giffen good...it violates the law of demand
because when price increases in case for a
giffen good, then demand is more likely to
increase and when price falls, demand will
also fall in the case of a giffen good and
a giffen good violates the law of demand.
Now what do you understand by ''ceteris paribus''?
Ceteris paribus means all other things remaining
constant.
