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Sandeep Garg Microeconomics Class 12 Solutions Chapter 3

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Sandeep Garg Microeconomics Class 12 Solutions Chapter 3

Class 12 Microeconomics Sandeep Garg Solutions Chapter 3 – Demand

Microeconomics Class 12 Chapter 3 Sandeep Garg Solution is the best chance for getting high scores in the coming exams. Class 12 Microeconomics Sandeep Garg Solutions Chapter 3 by Vedantu provides the readers with a deep insight into learning the Chapters with complete understanding. Download Sandeep Garg Microeconomics Class 12 Chapter 3 and excel in studies. The solutions are available in the free PDF format.

Here are some important concepts from Sandeep Garg Microeconomics Class 12 Chapter 3 discussed in detail. These important concepts will help you better understand the chapter in a gist. For more elaborate study material, you must consider visiting Vedantu online.

Overview of Sandeep Garg Microeconomics Class 12 Chapter 3

What is Demand?

As per Sandeep Garg Class 12 Microeconomics Solutions Chapter 3, Demand is defined as a desire or want that is backed by the ability and willingness to pay and the availability of the product in the market. A person must know the fundamental difference between a want and a demand. Both of them have a relatively similar meaning, but a want refers to just a desire or wishes that may or may not be satisfied. Whereas, the same want becomes a demand when the consumer has a strong desire to satisfy it. Demand is also defined as the amount of commodity which an individual can buy at different prices over a period of time.

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The difference between demand and quantity demanded are:

Difference Between Demand and Quantity Demanded

Demand: 1. Demand is the quantity that a buyer is willing to buy at different prices.

Quantity Demanded: 1. Quantity demanded is the quantity that a buyer is willing to buy at a particular price.

Demand: 2. Demand of a person varies as he/she moves from one point to another on a demand curve.

Quantity Demanded: 2. Quantity demanded refers to a particular point on the demand curve.

Demand: 3. Demand is measured over a period of time.

Quantity Demanded: 3. Quantity demanded is measured at one specific point of time.

Demand Function

The demand function expresses the functional relationship between the quantity demanded of a commodity and its determinants at a given point of time. The quantity demanded is a dependent variable, and the determinants are the independent variables. It can be written as Qx = f (Px, Pz, Y, T, E) where Qx represents the quantity of the good demanded, Px represents the price of the good, Pz represents the price of related goods, Y represents the buyer’s income, T represents the tastes, preferences, and fashion, and E represents the price expectation.

Determinants of Demand

1. Taste and Preference: When there is a favourable change in taste and preference regarding any commodity then demand for that commodity increases. If there is an unfavourable change in taste and preference regarding any commodity then demand that commodity decreases

2. Climatic Factors: If there is a pleasant/favourable change in the weather then demand for particular commodity increases, eg-Woollen in winter. If there is an unpleasant/unfavourable change in weather then demand for a particular commodity decreases; Eg. Woollen in summer.

3. The Income of Consumer: The demand for the commodity is directly related to the income of the consumer. The income of the consumer represents his/her purchasing power. Hence, if income increases, the buyer will demand more for a commodity and vice-versa.

4. Taste, Preferences and Fashion: When the taste, preferences and fashion of the consumers are not in favour of the commodity, the demand for the commodity decreases.

5. Price Expectations: The demand for the commodity will increase at present times if the price of the commodity is expected to increase in the future.

6. Size and Composition of Population: If the population of the country increases the demand also increases and if the population decreases the demand also decreases.

7. Consumer's Expectation: When the consumer thinks that the price for a particular commodity will rise in the future then he will increase the demand for that commodity and if he thinks that its price is going to decrease in future then he will decrease its demand.

8. Credit Facility: If the credit increases the down payment for a commodity decreases and the loan facility increases and initially the credit facility increases and therefore the demand for a commodity also increases and vice versa.

9. Demonstration Effect: The demonstration effect plays an important role in affecting the demand for a commodity. The demonstration effect refers to the tendency of a person to emulate the consumption styles of other persons such as his friends, common neighbours, etc. For instance, the demand for luxury cars and expensive mobile sets has increased in recent years partly because of the desire of the people to follow the consumption style of others.

10. Distribution of Income:

Equal (Luxury Goods Demand goes down and Necessity Goods demand goes up)
Unequal (Luxury Goods ↑ and Necessity Goods ↓)

The distribution of Income in a country also affects the demand for goods. If the distribution of income in a country is unequal there will be more demand for luxury goods like cars and LED T.V. On the other hand, if the income is equally distributed there will be less demand for luxury goods and more demand for essential commodities.

11. Government Policy: Economic Policy of the government also influences the demand for commodities. If the government imposes taxes on various commodities in the form of VAT, excise duties, etc. The prices of these commodities will increase as a result demand for these commodities will fall. But on the other hand, if the government incurs more expenditure on the construction of roads, bridges, etc. The demand for the goods used for construction will increase.

On Vedantu you will get free and easy access to Sandeep Garg Microeconomics Class 12 Chapter 3 and so much more. The Chapter can be downloaded for free in a PDF format which can be referred to by students during their prep anytime, anywhere.

Law of Demand

The law of demand states that the quantity demanded of the commodity decreases with the price increase and increases with the price fall, under the condition of ceteris paribus. Therefore, according to the law of demand, price and quantity demanded are inversely related. The condition of ceteris paribus means other things such as buyer’s income, price of the complement and substitutes, consumer’s tastes, preferences, and fashion and price expectations remain the same.

The tabular representation of the price-quantity relationship during a given period of time is known as a demand schedule and the graphical representation of a demand schedule is known as the demand curve. A demand curve is always a downward or negatively sloped curve.

Solved Examples

Q. Explain the Exceptions to the Law of Demand.

Answer: The exceptions to the Law of Demand in which the commodities does not follow the law of demand and has a positively sloped curve are:

Goods associated with prestige value and snob appeal.
Giffen goods.
War or Emergency.
Commitment to a brand.
Price Expectation.
Speculation.

FAQs on Sandeep Garg Microeconomics Class 12 Solutions Chapter 3

1. What are Normal Goods?

Normal goods are those goods whose demand increases with the income of the consumer and vice versa. Therefore, it has a positive relationship with the income of the consumer. When the income of the consumer increases, they tend to shift to buying superior products like they buy basmati rice instead of coarse rice, they buy branded garments instead of non branded ones and so on. Normal goods are of two types, i.e. necessity goods and luxury goods. Necessity goods are those which have a positive income elasticity of demand. Luxury goods are more income elastic as compared to necessity goods.

2. What are Inferior and Giffen Goods?

Inferior goods are those whose demand falls with the rise in income. It is because the consumer will tend to buy a luxurious substitute when his/her income rises. Whereas, if there is a fall in income, then the consumer will buy more inferior goods. Giffen goods fall under the category of inferior goods which are an exception to the law of demand. It means that when the price of the Giffen goods increases, their demand increases and demand decreases when there is a price fall. Hence, the demand curve for Giffen goods is positively sloped. However, it has an inverse relationship with income.

3. What is the difference between the Individual demand curve and the Market demand curve?

Individual Demand Curve is the locus of different combinations of price and quantity of a commodity of one particular buyer at different possible prices at a point in time. On the other hand, Market Demand Curve is the locus of combinations of price and quantity of a commodity of all the buyers in the market at different possible prices at a point in time.
Individual Demand Curve is drawn based on individual demand schedule. On the other hand, the Market Demand Curve is drawn based on the market demand schedule.
No aggregation is needed for individual demand curves whereas aggregation is needed for the market demand curve.

4. What is the difference between Movement along the Demand Curve (Change in demand) and shift in Demand Curve (change in demand)?

Other things remaining constant, if the quantity demand increases or decreases due to fall or rise in the own price of the commodity alone, it is called a change in quantity demand or movement along the Demand Curve. On the other hand, if more or less quantity of a commodity is demanded with the change in any one of the factors affecting demand (other than own price) is called a change in demand or shift in the demand curve.
If the change in quantity is demanded we move along the same demand curve. In a change in demand, we move from one demand curve to the other.
Demand schedule remains unaffected by the change in quantity demanded. A demand schedule is affected by changes in demand.
Two kinds of movement - upward and downward – movement are there in a change in quantity demanded. Two kinds of movements-rightward and leftward – movement in a change in demand.

5. What is the difference between the law of demand and the elasticity of demand?

Law of demand states the inverse relationship between the price of a commodity and its quantity demanded. The elasticity of demand states the percentage change in quantity demand of a commodity due to a percentage change in its price.
Law of demand measures the directions of change in quantity due to change in its price. The elasticity of demand measures the magnitude of change in quantity demand due to a change in its price.
We get a negatively sloped demand curve due to the law of demand. We get the different types of demand curves due to the degree of elasticity of demand.