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DEMAND  DEMAND of a commodity refers to the quantity of a commodity which a consumer is willing to buy at a given price and at a given point of time. DETERMINANTS OF DEMAND The various factors which determine the demand for a commodity are described as follows: PRICE OF THE COMMODITY The demand for a commodity is inversely related to its price. This means when the price of the commodity increases, its quantity demanded decreases and vice versa. This happens due to the change in the purchasing power or the real income of the consumer. When the price of the consumer increases, the purchasing power of the consumer decreases due to which he is able to buy a lesser quantity of the same commodity with his given income thus resulting in a drop in the quantity demanded. PRICE OF RELATED GOODS PRICE OF SUBSTITUTE GOODS Substitute goods are the goods which can be used in place of each other to satisfy a want. For instance, tea and coffee are substitute goods. The quantity...

Consumer's Equilibrium  In order to get the fair idea about this topic we need to understand some basic things associated with this topic. Marginal Utility of a good -:  It is always diminishing. Law of diminishing MU will operate. This law states when a consumer consumes more and more amount of a good, he derives less and less satisfaction from the consumption of successive units. Marginal Utility of Money -:  This is assumed to be constant. If a consumer gets satisfaction worth 4 utils from one rupee, he will get satisfaction worth 400 utils from Rs 100/-. Marginal Utility of a good in terms of Money  (MU x tm )-:  This is the ratio of Marginal utility of a good to MU of money. It is just conversion of Marginal utility of a good in to  money. It means how much money is required to buy the given utility. Suppose Utility of one rupee = 4 utils Suppose a consumer is consuming a chocolate and getting satisfaction equals to 100 utils. Then utility of ...