Law of demand notes sample

Law of demand

In economics, the law of demand is an economic law that states that consumers buy more of a good when its price decreases and less when its price increases (ceteris paribus).
The greater the amount to be sold, the smaller the price at which it is offered must be in order for it to find purchasers.
Law of demand states that the amount demanded of a commodity and its price are inversely related, other things remaining constant. That is, if the income of the consumer, prices of the related goods, and tastes and preferences of the consumer remain unchanged, the consumer’s demand for the good will move opposite to the movement in the price of the good.
"If the price of the good increases, the quantity demanded decreases, while if price of the good decreases, its quantity demanded increases."

Mathematical expression

The negative relation (i.e., higher price attracts lower demand & lower prices encourages high quantity to be bought by the consumers) is based on logic and experience. Mathematically, the inverse relation may be stated with causal relation as:

Q_x = f(P_x)

Where, Q_x is the quantity demanded of x goods
f is the function, and
P_x is the price of x goods.

Hence, in the above model, the function (f) is a varying one i.e., the law of demand postulates P_x as the causal factor (independent variable) and Q_x is the dependent variable.

The two variables move in the opposite direction. When P_x falls Q_x rises and the reverse. In regard to the question "by how much will quantity demanded rise?", the law is silent. For example, when P_x for a one-way rail ticket on the Acela Express from Boston's South Station to New York City's Penn Station falls from $111 to $105, ridership may rise from 1625 daily riders to 1825 daily riders or even to just 1626 daily riders. Thus the law of demand merely states the direction in which quantity demanded changes for a given change in price. Moreover, what the law states is hypothetical and not actual.

Assumptions

Every law will have limitation or exceptions. While expressing the law of demand, the assumptions that other conditions of demand were unchanged. If remain constant, the inverse relation may not hold well. In other words, it is assumed that the income and tastes of consumers and the prices of other commodities are constant. This law operates when the commodity’s price changes and all other prices and conditions do not change. The main assumptions are

• Habits, tastes and fashions remain constant
• Money, income of the consumer does not change.
• Prices of other goods remain constant
• The commodity in question has no substitute
• The commodity is a normal good and has no prestige or status value.
• People do not expect changes in the prices.

Exceptions to the law of demand

Generally, the amount demanded of good increases with a decrease in price of the good and vice versa. In some cases, however, this may not be true. Such situations are explained below. Giffen goods: As noted earlier, if there is an inferior good of which the positive income effect is greater than the negative substitution effect, the law of demand would not hold. For example, when the price of potatoes (which is the staple food of some poor families) decreases significantly, then a particular household may like to buy superior goods out of the savings which they can have now due to superior goods like cereals, fruits etc., not only from these savings but also by reducing the consumption of potatoes. Thus, a decrease in price of potatoes results in decrease in consumption of potatoes. Such basic good items (like bajra, barlery, grain etc.) consumed in bulk by the poor families, generally fall in the category of Giffen goods.

 Commodities which are used as status symbols

Some expensive commodities like diamonds, air conditioned cars, etc., are used as status symbols to display one’s wealth. The more expensive these commodities become, the higher their value as a status symbol and hence, the greater the demand for them. The amount demanded of these commodities increase with an increase in their price and decrease with a decrease in their price.

 Law of demand and changes in demand

The law of demand states that, other things remaining same, the quantity demanded of a good increases when its price falls and vice-versa. Note that demand for goods changes as a consequence of changes in income, tastes etc. Hence, the demand may sometime expand or contract and increase or decrease. In this context, let us make a distinction between two different types of changes that affect quantity demanded, viz., expansion and contraction; and increase and decrease.

While stating the law of demand i.e., while treating price as the causative factor, the relevant terms are Expansion and Contraction in demand. When demand is changing due to aprice change alone, we should not say increase or decrease but expansion or contraction. If one of the nonprice determinants of demand, such as the prices of other goods, income, etc. change & thereby demand changes, the relevant terms are increase and decrease in demand. The expansion and contraction in demand are shown in the diagram. You may observe that expansion and contraction are shown on a single DD curve. The changes (movements) take place along the given curve.

Determinants of demand

After having understood the nature of demand and law of demand, it is easy to ascertain the determinants of demand. We have mentioned above that an individual demand for a commodity depends on desire for the commodity and his capability to purchase it. The desire to purchase is revealed by tastes and preferences of the individuals. The capability to purchase depends upon his purchasing power, which in turn depends upon his income and price of the commodity. Since an individual purchases a number of commodities, how much quantity of a particular commodity he chooses to purchase depends upon the price of that particular commodity and prices of the other commodities, beside his income?

So, the amount demanded (per unit of time) of a commodity depends upon

Prices of related commodities

When a change in price of the other commodity leaves the amount demanded of the commodity under consideration unchanged, we say that the two commodities are unrelated, otherwise these are related. The related commodities are of two types’ substitutes and complements. When the price of one commodity and the quantity demanded of the other commodity move in the same direction (i.e., both increase together and decrease together).

Income of the individual

The amount demanded of a commodity also depends upon the income of an individual. With an increase in income, increased amount of most of the commodities in his consumption bundle, though the extent of the increase may differ between commodities.

Macro concepts of demand

Individual demand, firms demand and industry demand are the micro concepts of demand. This is useful to manager in decision making as to determination of size of supplies etc. However, a manger has to know the macro concepts of demand as he operates within the macroeconomic environment. As such he much understands a few macro concepts of demand. As a matter of fact, national demand may influence the industry demand which in its turn may influence the firms demand. Some of the important macro-concepts of demand are illustrated below.

Effective demand

This refers to the aggregate volume of demand in an economy, (size of the market), which induces the manufacturers to adjust that demand by supply. Thus if demand is ‘effective’, it should create employment, induce output and generate income in the economy.

Investment demand

It is another component of effective demand. It has reference to the demand for investment goods i.e., investment expenditure in the national economy which is dependent on the net return on investment.

Demand for money

This refers to desire to hold money (liquidity) in hand. In any of the three motives i.e., transaction, precaution or speculation. Accordingly, we may speak of transaction demand for money to meet day-to-day exchange transactions. The precautionary demand for moneys to meet contingency requirements. The speculative demand for money has got long-term business use; it is mostly influenced by the market rate of interest. In fact, the rate of interest is the opportunity costs of holding money in hand for speculative purposes.

Demand for bonds

Since money and bonds are substitutes, the demand for bonds is related to the demand for money...

Limitation

• Change in taste or fashion.
• Change in income
• Change in other prices.
• Discovery of substitution.
• Anticipatory change in prices.
• Rare or distinction goods.
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·         Industrial relations

·          

·         Industrial relations is a multidisciplinary field that studies the employment relationship.^[1] Industrial relations is increasingly being called employment relations because of the importance of non-industrial employment relationships. Many outsiders also equate industrial relations to labour relations and believe that industrial relations only studies unionized employment situations, but this is an oversimplification.

·         Industrial relations has three faces: science building, problem solving, and ethical.^[2] In the science building face, industrial relations is part of the social sciences, and it seeks to understand the employment relationship and its institutions through high-quality, rigorous research. In this vein, industrial relations scholarship intersects with scholarship in labor economics, industrial sociology, labor and social history, human resource management, political science, law, and other areas. In the problem solving face, industrial relations seeks to design policies and institutions to help the employment relationship work better. In the ethical face, industrial relations contains strong normative principles about workers and the employment relationship, especially the rejection of treating labor as a commodity in favor of seeing workers as human beings in democratic communities entitled to human rights."The term human relations refers to the whole field of relationship that exists because of the necessary collaboration of men and women in the employment process of morden industry."It is that part of management which is concerned with the management of enterprise -whether machine operator,skilled worker or manager.It deals with either the relationship between the state and employers and workers organisation or the relation between the occupational organisation themselves.

·         Industrial relations scholarship assumes that labor markets are not perfectly competitive and thus, in contrast to mainstream economic theory, employers typically have greater bargaining power than employees. Industrial relations scholarship also assumes that there are at least some inherent conflicts of interest between employers and employees (for example, higher wages versus higher profits) and thus, in contrast to scholarship in human resource management and organizational behavior, conflict is seen as a natural part of the employment relationship. Industrial relations scholars therefore frequently study the diverse institutional arrangements that characterize and shape the employment relationship—from norms and power structures on the shop floor, to employee voice mechanisms in the workplace, to collective bargaining arrangements at a company, regional, or national level, to various levels of public policy and labor law regimes, to "varieties of capitalism" (such as corporatism), social democracy, and neoliberalism).

·         When labor markets are seen as imperfect, and when the employment relationship includes conflicts of interest, then one cannot rely on markets or managers to always serve workers’ interests, and in extreme cases to prevent worker exploitation. Industrial relations scholars and practitioners therefore support institutional interventions to improve the workings of the employment relationship and to protect workers’ rights. The nature of these institutional interventions, however, differ between two camps within industrial relations.^[3] The pluralist camp sees the employment relationship as a mixture of shared interests and conflicts of interests that are largely limited to the employment relationship. In the workplace, pluralists therefore champion grievance procedures, employee voice mechanisms such as works councils and labor unions, collective bargaining, and labor-management partnerships. In the policy arena, pluralists advocate for minimum wage laws, occupational health and safety standards, international labor standards, and other employment and labor laws and public policies.^[4] These institutional interventions are all seen as methods for balancing the employment relationship to generate not only economic efficiency, but also employee equity and voice.^[5] In contrast, the Marxist-inspired critical camp sees employer-employee conflicts of interest as sharply antagonistic and deeply embedded in the socio-political-economic system. From this perspective, the pursuit of a balanced employment relationship gives too much weight to employers’ interests, and instead deep-seated structural reforms are needed to change the sharply antagonistic employment relationship that is inherent within capitalism. Militant trade unions are thus frequently supported.

Public relations (PR)

Althouhg public relations is a part of the marketing function,the background for positions in this area is often in communications or gournalism.Because the public relations department is the link between the organization and its various publics,effective communication skills are of vital importance.

Members of the public relations department must be kept fully advised of internal changes in marketing strategy,advertising,and new products.They must,at the same time,share this and information about products,labor policies,community activities,and social programs with the public.They must also deal directly with the news media and are often responsible for internal communications,including employee and management newsletters.

Others define it as the practice of managing communication between an organization and its publics. Public relations provides an organization or individual exposure to their audiences using topics of public interest and news items that provide a third-party endorsement and do not direct payment. Once common activities include speaking at conferences, working with the media, crisis communications and social media engagement, and employee communication.

The European view of public relations notes that besides a relational form of interactivity there is also a reflective paradigm that is concerned with publics and the not only with relational, which can in principle be private, but also with public consequences of organizational behaviour . A much broader view of neo-ubiquitous interactive communication using the,as outlined by Phillips and Young in Online Public Relations Second Edition (2009), describes the form and nature of Internet-mediated public relations. It encompasses social media and other channels for communication and many platforms for communication such as personal computers (PCs), mobile phones and video game consoles with Internet access.

The entry-position is usually as a public relations trainee,which could involve preparing press releases or working on company publications.people often  specialize in certain areas within the public relations department and /or work their way up to vice president or director of public relations.

Entry-level jobs in public relations are not highly paid,and the compensation for  top jobs in bublic relations depends largely on the firm and its industry.in the past,industrial firms have tended to pay better than consumer maketers.Working toward the goal of projecting the desired company image to the public is an important and difficult task,but a creative and rewarding one.

Public relations is used to build rapport with employees, customers, investors, voters, or the general public.Almost any organization that has a stake in how it is portrayed in the public arena employs some level of public relations. There are a number of public relations disciplines falling under the banner of corporate communications, such as analyst relations, media relations, investor relations, internal communications and labor relations.

Other public relations disciplines include:

• Financial public relations - providing information mainly to business reporters
• Consumer/lifestyle public relations - gaining publicity for a particular product or service, rather than using advertising
• Crisis public relations - responding to negative accusations or information
• Industry relations - providing information to trade bodies
• Government relations - engaging government departments to influence policymaking

Sales

There are more job apportunites,especially entry level positions,in personal selling than in any other area.it is also generally one of the very highest paying careers right from hte beginning than any other career track. A college degree used to be unnecessary for selling,but that is vecoming less true.Company sales forces are benefiting more and more from the business and technical skills of their salespeople.

Selling positions are found in a wide variety of organizations,both consumer and industrial,and they cover a variety of activities.These positions could involve calling on a number of customers each day ,putting up and maintaining displays,checking inventory levels,or taking orders for stock.problem-solving for customers is increasingly becoming part of the sales job.

There are generally two career paths you can follow in sales.first,a salesperson may make sales a career and become a specialist in dealing with jobbers,chains,or vendors,or in selling to specialized target groups such as independent grocers and hospitals.The person may even specialize in selling particular types of products.The second path is to become sales managers under you.This could ultimately lead to becoming  national sales manager,vice president or sales,or perhaps, even president. Sales is a common route to the top.