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Theory of demand

created Jul 22nd, 04:02 by Pratik Sapkota


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Theory of demand seeks to establish relationship between the quantity demanded of the commodity and the price.It also offers an explanation for variations in demand. There are different approaches known to the economists to the theory of demand.The oldest among them is the marginal utility approach. The marginal utility analysis explains consumer's demand for the commodity and derives a law of demand which shows an inverse relationship between the quantity demanded and the price of the commodity. That is, it states that as price falls, demand is extended, and vice  versa.Recent economists have pointed out several flaws in the utility analysis and have offered new utility analysis of demand and have offered new theories. For instance, we have the indifference curve technique developed by J.R. Hicks and R.G.D. Allen. This has been fallowed by further refinement in Samuelsons' Revealed Preferences Theory and Hicks' Logical Weak ordering theory. In this chapter, we shall take up the marginal utility analysis.   

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