- Law of demand:- The market demand is negatively related to the price. Demand curve has a negative slope.This economic principle describes something you already intuitively know -- if the price goes up, people buy less. The reverse is, of course, true -- if the price drops, people buy more. However, price is not the only determining factor.
- Therefore, the law of demand is only true if all other determinants don't change. In economics, this is known as ceteris paribus. Therefore, the law of demand formally states that, ceteribus paribus, the quantity demanded for a good or service is inversely related to the price.
- The demand schedule is a table or formula that tells you how many units of a good or service will be demanded at the various prices.
- Demand Curve:- The graphical representation of the demand schedule through curve is demand curve.
- Consumer behavior (CB):- The consumer is assumed to be rational. it can be measured by 2 methods(utility theory)
- Cardinal utility theory:-Consumers are rational.This type of utility is measurable(utils). Consent marginal utility of money. Diminishing marginal utility. The total utility of a basket of goods depends on qualities of individual commodities. u= f (x1,x2,.....xn).{u=utility=function of each as well as th successive units of the commodity consumed.}
- Criticism faced by utility concept:- How to measure utility? This is an unrealistic concept. It can not be used as measuring rod. Diminishing marginal utility is a psychological law.
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Consumer equlibrium :-
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