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Elementary Theory of Demand — Economics STD 10 — Question

ICSE BoardEnglish MediumSTD 10EconomicsElementary Theory of Demand4 Marks
Question
(i) Define the term demand.
(ii) Explain three factors that affect the demand for a commodity.
###Explain any three determinants or factors affecting demand.
(iii) Why are prestige good an exception to the law of demand?
✓

Answer

Image
Market demand curve is obtained by horizontal summation of individual demand curves.
In the diagram, DA and DB are two demand curves of A and B respectively. Supposing that there are two individuals in the market, market demand curve DM has been derived by taking their horizontal sum. Which means the sum of quantity demanded, not price.
Prestige Goods: Many goods have prestige value, that is, they increase the status of consumers who own or use them. These are called prestige goods. Jewellers and fashionable clothing luxurious cars are examples of these prestige goods. The law of demand does not apply in case of prestige goods the demand for prestige goods is more when their price is high. Such goods are mainly purchased because their price is high. A fall in their price may lead the rich people to buy less because now the rich person's desire for display is not satisfied. This exception was first explained by the American economist Veblen. So, prestige goods are known as Veblen goods.

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