Demand- Features

▶Demand Curve slopes Downward- It indicates more is purchased in response to fall in price.

(i) Law of Diminishing Marginal Utility- This law states that as consumption of a commodity increases, Marginal Utility of each unit goes on diminishing. Accordingly for every every additional unit to be purchased, the consumer is willing to pay less and less of price.

(ii) Income Effect- With fall in price of a commodity, the real income of the consumer increases. Accordingly demand for the commodity expands.

(iii) Substitution Effect- When own price of Commodity (X) falls it becomes cheaper in relation to commodity (Y). It is expansion of Demand (For X) due to Substitution Effect.

(iv) Size of Consumer Group- When price of a commodity falls, many more buyers can afford to buy it. Accordingly demand for the commodity expands.

(v) Different Uses- A good may have different uses. Milk, for an example, is used for making curd, butter, cheese, sweets, ice-cream etc. If price of milk reduces, it will be out in different uses. Accordingly demand for milk expands.

▶ Exceptions of the Law of Demand:

(i) Article of Distinction- Accordingly to Professor Veblon, there are certain goods which are ' article of distinction '. If their prices fall they will be no longer considered as article of distinction and their demand shrink. Example- Diamond, Vintage Cars etc.

(ii) Giffen Goods- These goods are highly inferior goods, showing a very negative effect on income. As a result, when price of auch goods falls their demand also falls. This is popularly known as Giffen Paradox.

(iii) Irrational Judgement- Consumer judge the quality of goods by its price. It is an Irrational judgement. Richer society consider organic products in market as of very high quality and price. Accordingly, Quantity demanded of these products has tended to rise even when their prices are extremely high.

◆ Note- Demand Curve slopes Upward when Law of Demand fails.

▶ Movement along a Demand Curve and Shift in Demand Curve:

◆ Movement refers to Extension and  Contraction of Demand.

(i) Extension of Demand- It occurs when quantity demanded increases in response to a fall in own price of the commodity.

(ii) Contraction of Demand- It occurs when quantity demanded decreases in response to a rise in own price of commodity.

◆ Rightward Shift- A situation when there is increase in demand.( When more is purchased at same price of the commodity).

◆ Leftward Shift- A situation when there is decrease in demand.( When less is purchased at the same price of commodity)