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Leftward Shift Theory

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CHAPTER 2
Concept Integration
2.1 Demand
Consumers need, ability and willingness to pay for a particular commodity is called demand.
2.2 Demand curve
The Demand curve shows the relationship between the quantities of a good that the consumers are willing to buy and the price of the good
2.2.1 Law of demand
The law of demand states that when the price of a product increases the demand for the same decreases. The price and quantity demanded of a good or services are inversely related to each other. It can be inferred from the above figure that as the price of a product increases, the demand for it decreases. When the price increases to P2 the Quantity demanded decreases to Q2, whereas if the price of the good decreases to P1 the demand increases …show more content…

These shifts can be of two types
1. Leftward
2. Rightward
2.3.3.1 Leftward shift
Leftward shift happens when the supplier produces less at the same price. E.g. decrease in the supply of Cotton owing to increase in price of excessive cotton exports can lead to decrease in production of Raymond’s shirts. S2- Supply after cotton price rise, S1- Supply before cotton price rise
2.3.3.2 Rightward Shift
Rightward shift happens when the suppliers are willing to supply more at the same price. As technology improves, cost of production decreases and the suppliers are able to supply more at the same …show more content…

2.4 Elasticity of Demand
The elasticity of demand for a good is the rate at which quantity changes as the price changes Price elasticity is relatively elastic. Hence a small change in price can lead to a big change in quantity demanded.
In this situation, elasticity for demand is more than 1 (ed>1)

From the above figure we can see that the price of Raymond’s was p, the quantity demanded was Q, when the price increases to P’ then the quantity demanded to Q’. Hence the demand for Raymond’s apparel is elastic in nature and its elasticity for demand is more than 1. (ed>1)
2.4 Profit Maximization
It’s the process by which a firm determines the price and output level that returns the greatest profit. Profit is the main objective of all organizations. Profit Maximization is used in micro economics to predict the business’s revenue and profit accurately. With Innovation and research, Raymond’s was able to compete with the top brands of India such as Bombay dyeing and Vimal. Firm that cannot maximize profit can’t survive the market. Raymond’s has various sub brands such as Park Avenue and Colour plus which target casual clothing

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