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NEED/DESIRE/WANT/DEMAND

NEED/DESIRE/WANT/DEMAND. NEED-Arousal of awareness or recognition that one has to take some action to remove a particular feeling. Something missing that requires to be obtained to remove the feeling.Eg.hunger,rest,illness etc Related with essentials of life without which one cannot live.

zachery-valentine
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NEED/DESIRE/WANT/DEMAND

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  1. NEED/DESIRE/WANT/DEMAND • NEED-Arousal of awareness or recognition that one has to take some action to remove a particular feeling. • Something missing that requires to be obtained to remove the feeling.Eg.hunger,rest,illness etc • Related with essentials of life without which one cannot live

  2. DESIRE • Awareness of need leads to desire for satisfying it or removing it.

  3. WANTS • Desire backed by purchasing power for satisfying it or removing it

  4. NEED$ AND WANT$ • One important idea in economics is that of needs and wants.

  5. NEED$ AND WANT$ • Needs would be defined as goods or services that are required. This would include the needs for food, clothing, shelter, health care. These are things you must have to live.

  6. NEED$ AND WANT$ • Wants are goods or services that are not necessary but that we desire or wish for.

  7. NEED$ AND WANT$ • For example, one needs clothes, but one may not needs designer clothes. One does not need toys, movies, or games. One needs food, but does not have to have steak or dessert.

  8. NEED$ AND WANT$ • Many times advertisers try to appeal to consumers in such a way that the consumers feel they need certain goods or services when in fact they only want them.

  9. NEED$ AND WANT$ • Do you need this or do you want this?

  10. NEED$ AND WANT$ • Need or want?

  11. NEED$ AND WANT$ • Need or want?

  12. NEED$ AND WANT$ • Try this need and wants activity. Activity

  13. Resources • Needs and Wants

  14. Human Wants • Goods are priced because of their usefulness; Usefulness leads to the demand while scarcity leads to its supply. Therefore the interaction of demand and supply is the point where the prices of goods is determined.

  15. Human Wants : The basis of all economic activities is the existence of human wants and the process of fulfillment of this want is where all economics activities start. • Definition of Human Want : • . “Desire is the wish to have something. But ‘want’ is an effective desire for a particular thing, which can be satisfied by making an effort to acquire it.

  16. Human Wants • Three elements that make a desire, an effective desire or a want: • (i) willingness • (ii) resources for fulfilling the desire and • (iii) willingness to part with the resource to fulfill that desire • In other words its the want-effort-satisfaction which forms the subject matter of economics

  17. DEMAND • Quantity purchased at a given price and at a given point of time

  18. Features of Human Wants Classification of Human Wants : necessaries, comfort and luxuries. • Features : • 1. Unlimited Wants • 2. Some wants are complementary • 3. A single want is satiable • 4. Substitutability of Wants • 5. Wants are competitive • 6. Wants multiply • 7. Wants re-occur • 8. Some wants can be postponed • 9. Wants differ in urgency and intensity

  19. Economic Significance of Human Wants • 1 The material prosperity of a country can be gauged from the number and variety of human wants normally satisfied. • 2 Shows important features which are the basis of important laws in Economics – Laws of diminishing return, law of substitution, etc

  20. Consumption • Goods and services need to be consumed in order to satisfy human wants. Consumption is registered the beginning as well as the end of all economic activities.

  21. Utility • Utility refers to want satisfying power of a commodity. • In objective terms, utility may be defined as the “amount of satisfaction derived from a commodity or service at a particular time”. • Utility can be measured.

  22. Demand • Meaning and Definition of Demand • According to Benham: “The demand for anything, at a given price, is the amount of it, which will be bought per unit of time, at that price.” • According to Bobber, “By demand we mean the various quantities of a given commodity or service which consumers would buy in one market in a given period of time at various prices.”

  23. Requisites: • Desire for specific commodity. • Sufficient resources to purchase the desired commodity. • Willingness to spend the resources. • Availability of the commodity at • (i) Certain price (ii) Certain place (iii) Certain time.

  24. Kinds of Demand • Market demand • Individual demand • Income Demand-(later)

  25. 4. Cross demand • Demand for substitutes or competitive goods (eg.,tea & coffee, bread and rice) • Demand for complementary goods (eg., pen & ink) • 5. Joint demand (same as complementary, eg., pen & ink) • 6. Composite demand-D for a good that has multiple uses (eg., coal & electricity)

  26. 7. Direct demand (eg., ice-creams) • 8. Derived demand (eg., TV & TV mechanics) • 9. Competitive demand (eg., desi ghee and vegetable oils) • 10.Demand of unrelated goods

  27. Factors Determining Demand • (i) Price of the commodity – Normally there is an inverse relationship between the price of the commodity and the quantity demanded. (Px) • (ii) Income of the Consumer – Determines the purchasing power of the consumer. Generally, there is a direct relationship between the income of the consumer and demand. (Y) • Qdx = f (Px, Pr ,Y , T, D)

  28. (iii) Consumer’s taste and preference (T) • (iv) Price of related commodities (Pr) • (v) Consumer Expectation (expected change in price) • (v) Distribution of income • (vi) Size and composition of population • (vii) Other Factors e.g., natural calamities

  29. DEMAND • The Demand for a commodity is the amount of it that a consumer will purchase at various given prices in a given period of time

  30. Law of Demand • Prof. Samuelson: “Law of demand states that people will buy more at lower price and buy less at higher prices, others thing remaining the same.” • Ferguson: “According to the law of demand, the quantity demanded varies inversely with price”.

  31. Assumptions: • No change in tastes and preference of the consumers. • Consumer’s income must remain the same. • The price of the related commodities should not change. • The commodity should be a normal commodity

  32. LAW OF DEMAND • Other things being equal, if the price of the commodity falls , the quantity demanded of it will rise, and if the price of the commodity rises, its commodity demanded will decline. • Hence there is inverse relationship between price and quantity demanded, other things remaining the same (ceterus paribus).

  33. Demand Curve • Demand Curves –A demand curve is a graphical depiction of the law of demand. The picturization or the plotting of the demand schedule is called the demand curve. It is the curve showing different quantities demanded at alternative prices.

  34. Demand Curve • The demand curve slopes downwards from left to right which indicates that there is an inverse relationship between price and quantity demanded. • Demand Schedules for Apples • Price/kg Demand-A Demand-B Market(A+B) • 30 4 3 7 • 25 6 5 11 • 20 9 8 17 • 15 13 12 25 • 10 17 15 32

  35. UTILITY • Utility theory: • Very abstract but helps understanding many societal issues • What we are willing to pay for a product or a services depends on how satisfied we feel when consuming the product. • What is utility • Def: Ability of a product / service to satisfy a person's wants. i.e. It is a measure of satisfaction • Problem: to maximise society’s utility must quantify satisfaction gained from consumption and there is no such measure. But for our example, we will use the imaginary unit of measure called UTILS

  36. Utility • Utility refers to want satisfying power of a commodity. • In objective terms, utility may be defined as the “amount of satisfaction derived from a commodity or service at a particular time”.

  37. Assumptions: • Utility can be measured. • Marginal Utility of money remains constant • No change in income of the consumer, his taste & fashion to be constant • No substitute • Independent marginal utility of each unit of commodity

  38. Constancy of Marginal Utility of Money • Introspective Method-It’s the ability of the observer to reconstruct events which go in the mind of another person with the help of self observation.

  39. Utility theory cont. • Law of diminishing marginal utility: As more of a product is consumed, the marginal utility gained from its consumption will drop. Aside: Though generally more is better, the more of something we have the more satisfied we feel when it comes to that particular good or service: like quenching a thirst.

  40. Marginal Utility (MU) • The word Marginal means “Border” or “Edge”. • It is the addition made to the total utility by consuming one more unit of a commodity.

  41. Total and Marginal Utility • Total utility (TU): total utils a consumer derives from consuming products and services. • Marginal utility (MU): additional utility that one gets from consumption of the last unit consumed at a particular time. • Curve of TU : Change in TU = MU Change in Q TU MU A A Q Q

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