Theory of Demand - CA Foundation Economics Marathon | CA Foundation Dec 2023 | CA Hardik Manchanda
CA Hardik Manchandaγ»2 minutes read
The text covers a comprehensive overview of demand in economics, discussing factors like consumer preferences, income, and government policies that influence purchasing behavior and product demand. It also delves into concepts like elasticity of demand and forecasting, emphasizing the importance of understanding price changes, consumer needs, and long-term demand patterns for effective decision-making.
Insights
- Demand consists of desire, purchasing power, and willingness to pay, expressed at a given price, and influenced by factors like disposable income and preferences.
- Consumer demand fluctuates based on changing tastes, preferences, and external factors like income expectations and population demographics.
- Government policies, taxation, and subsidies directly impact product demand, with higher taxes reducing demand and subsidies boosting it.
- Understanding elasticity of demand, including price elasticity and income elasticity, is crucial in predicting changes in quantity demanded and expenditure, influenced by factors like availability of substitutes and nature of goods.
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Recent questions
What factors influence consumer demand?
Factors like price, income, and preferences.
How do external factors impact consumer preferences?
External factors like bandwagon and snob effects influence preferences.
What is the Law of Demand?
The Law of Demand states an inverse relationship between price and demand.
How does income elasticity impact consumer demand?
Income elasticity distinguishes between normal and inferior goods.
Why is forecasting demand important for businesses?
Forecasting demand aids in budget control and production planning.
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