a. What is demand? Explain how quantity demanded of a commodity X will be affected by
i. An increase in the price of its substitutes
ii. Consumer credit facility
iii. Government policy.
i. An increase in the price of its substitutes
ii. Consumer credit facility
iii. Government policy.
a. Demand : Demand for any commodity refers to the quantity of that commodity which consumers are willing to purchase at different prices during a given time of period.
i. Quantity demanded of a commodity X will increase with an increase in the price of its substitutes because they will compete with each other for the same demand in the market.
ii. With consumer credit facility the demand for commodity X will increase because consumers would be tempted to purchase commodity X which they could not have purchased otherwise.
iii. Demand for commodity X will vary with government policy. If the government imposes taxes on commodity in the form of sales tax, excise duties, VAT etc. the price of this commodity will increase. As a result, demand for this commodity will fall. But, on the other hand, if the government incurs more expenditure on construction of roads, bridges, in setting up industries etc., the demand for cement, iron and goods needed for these purposes will increase and so of this commodity if it is in the list.
a. Demand : Demand for any commodity refers to the quantity of that commodity which consumers are willing to purchase at different prices during a given time of period.
i. Quantity demanded of a commodity X will increase with an increase in the price of its substitutes because they will compete with each other for the same demand in the market.
ii. With consumer credit facility the demand for commodity X will increase because consumers would be tempted to purchase commodity X which they could not have purchased otherwise.
iii. Demand for commodity X will vary with government policy. If the government imposes taxes on commodity in the form of sales tax, excise duties, VAT etc. the price of this commodity will increase. As a result, demand for this commodity will fall. But, on the other hand, if the government incurs more expenditure on construction of roads, bridges, in setting up industries etc., the demand for cement, iron and goods needed for these purposes will increase and so of this commodity if it is in the list.
