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Understanding how consumers behave in the marketplace is central to microeconomics—and to success in the UGC NET Commerce exam. One of the first concepts every aspirant must grasp is Demand Analysis, especially the Law of Demand and Elasticity of Demand.

This blog simplifies these core concepts and provides quick tips for UGC NET preparation.

What is Demand Analysis?

Demand Analysis refers to the process of understanding and evaluating consumer demand for a product or service. It examines the relationship between price and quantity demanded, and how other factors (like income, preferences, and price of related goods) affect this relationship.

Key Terms:

·       Demand: The quantity of a good a consumer is willing and able to buy at a given price during a specific time.

·       Individual Demand: Demand by a single consumer.

·       Market Demand: Total demand by all consumers in the market.

The Law of Demand

Definition:
The Law of Demand states that, ceteris paribus (other things being equal), as the price of a good falls, the quantity demanded increases, and vice versa.

Assumptions of the Law:

·       Consumer income remains constant

·       Prices of related goods do not change

·       No change in consumer tastes or preferences

Demand Curve:

·       Downward sloping from left to right.

·       Illustrates the inverse relationship between price and quantity demanded.

Exceptions to the Law of Demand:

·       Giffen Goods (inferior goods with upward-sloping demand)

·       Veblen Goods (luxury goods where higher price increases appeal)

·       Speculative Demand (expectation of further price rise)

·       Emergencies and necessities

Elasticity of Demand

Elasticity measures the responsiveness of quantity demanded to changes in price, income, or other factors.

1. Price Elasticity of Demand (PED):

Definition: The degree of responsiveness of quantity demanded to a change in the price of the good.

Formula:

$$\text{PED} = \frac{\%\text{Change in Quantity Demanded}}{\%\text{Change in Price}}$$

Types:

·       Perfectly Elastic (∞)

·       Elastic (>1)

·       Unitary Elastic (=1)

·       Inelastic (<1)

·       Perfectly Inelastic (0)

2. Income Elasticity of Demand (YED):

Definition: Measures how quantity demanded changes with a change in consumer income.

·       Positive for normal goods

·       Negative for inferior goods

3. Cross Elasticity of Demand (XED):

Definition: Measures how quantity demanded of one good changes when the price of another good changes.

·       Positive for substitutes

·       Negative for complements

UGC NET Commerce Preparation Tips:

1.     Understand Graphs: Practice drawing demand curves and elasticity types.

2.     Memorize Formulas: For price, income, and cross elasticity.

3.     Practice MCQs: Especially on types of elasticity and exceptions to the law of demand.

4.     Use Real-Life Examples: Think of Uber surge pricing (elastic), or salt (inelastic).

Conclusion:

Demand Analysis, the Law of Demand, and Elasticity form the core of consumer behavior in economics. These are not just theory-heavy topics—they are tools to understand how markets work. For UGC NET Commerce aspirants, mastering these can help crack both conceptual and application-based questions.

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