Meaning Of Demand:
Demand is the number of goods that the customers are ready and able to buy at several prices during a given time frame. The association between price and quantity demanded is also known as demand curve. Preferences and choices, which are the basics of demand, can be depicted as the functions of costs, odds, benefits, and other variables.
The amount of a good that the customer picks up modestly relies on the cost of the commodity, the cost of other commodities, the customer’s earnings, and his or her tastes and proclivity. The amount of a commodity that a customer is ready to purchase and is able to manage and afford, provided that the prices of goods, and customer’s tastes and preferences are known, is referred to as demand for the commodity.
In our daily life, we often see that a consumer’s preferences for products change according to their preferences, income, and the prices of the goods or the prices of the other goods.
Here, the demand of a product can be defined as the quantity of a product that a consumer is eager to purchase, can afford at a given price, and is according to his/her preferences and tastes. Whenever there is a change in any of those variables, the demand and supply of the product starts changing.
Related Links: Elasticity of Demand
Types of Demand:
Market or individual demand: Here, the individual demand is defined as the demand for products or services by an individual consumer. The market demand can be defined as a demand for a product made by a bunch of consumers who buy that product. Therefore, it is a collective demand of each individual’s demand.
Derived demand: The derived demand is defined when the goods manufactured are related to the demand for other products. For example, the demand for silk yarn is the result of the demand for silk cloth. However, the direct demand for goods can be defined when the demand for a product is independent. For example, there is an autonomous demand for cotton cloth.
Price demand: The price demand refers to the number of goods or services an individual is eager to buy at a given price.
Income demand: The income demand means the eagerness of a person to buy a definite quantity at a given income level.
Cross demand: This is one of the important types of demand where the demand of a product is not subjected to its own price but the price of other similar products is known as the cross demand
Explore:Demand curve and shifts in the demand curve
| Q.1 Define demand. Explain any four important factors that affect the demand for a commodity. | | Answer: | | (A) Definition of demand | ● Demand may be defined as the quantity of a commodity that a consumer is able and willing to buy, at each possible price, over a given period of time. ● Essential elements of demand are quantity, ability, willingness, prices, and period of time. |
|
| (B) The following are the important factors that affect the demand of a commodity: |
| (a) Own price of the given commodity | [Pi20 Car Di20 Car] [Pi20 Car Di20 Car]…Inverse Relation 
Own price is the most important determinant of demand. When the own price of a commodity falls, its demand rises and when its own price rises, its demand falls. Thus, we can say that there is an indirect relation between the price of a commodity and its quantity demanded. |
| (b) Price of related goods | Substitute goods [PMaruti Swift Di20 Car]…Direct Relation Complementary goods [PPetrolDi20 Car]…Inverse Relation Related goods are of two types. They are substitute and complementary. (i)Substitute goods When the prices of the substitute goods rise, the demand for the given commodity also rises and vice versa. For example, if the price of Maruti Swift increases, the demand for i20 will rise. (ii)Complementary goods (Car and Petrol) When the prices of the complementary goods rise, the demand for the given commodity falls and vice versa. For example, if the price of petrol rises, the demand for cars falls. |
| (c) income of the consumer | [IncomeHouseholdDNormal Goods]…Direct relation [IncomeHouseholdDInferior Goods]…Inverse relation To check the effect of change in the income of households over their demand, goods are divided into two categories. They are as follows:
(i) Normal goods (Positive relation) These are the goods whose demand rises with the rise in income. Example: Basmati rice (ii) Inferior goods (Negative relation) These are the goods whose demand falls with the rise in income and vice versa. Example: Low quality rice |
| (iii) Necessities: A third category is also there, necessities, demand for these generally does not change with change in income e.g. life-saving drugs. | |
| (d) Tastes and preferences of the consumer | The demand for a commodity is also affected by tastes and preferences. It rises if there is a favourable change in the tastes and preferences of the consumer and vice versa. |
| (e) Miscellaneous | Future expectations about price and income also affect the demand for a commodity in the present. Suppose, if we expect a rise in price in the near future, then we will increase demand in the present even at the same price. |
Also Read: What is Demand in Economics?
Let us Practice
1. _____________goods have positive income effect.
a. Normal
b. Inferior
c. Complementary
d. None of the above
Answer: a. Normal
2. The demand for which of the following goods does not change with the change in the income of the consumer?
a. Normal goods
b. Necessity goods
c. Inferior goods
d. None of the above
Answer: b. Necessity goods
3. If with the rise in the price of good Y, the demand for good X rises, then the two goods are which of the following?
a. Substitutes
b. Compliments
c. Not related
d. Jointly demanded
Answer: a. Substitutes
FAQs
Determinants that influence demand include price changes (own-price elasticity), income levels (income elasticity), availability of substitutes or complements (cross-price elasticity), consumer preferences or tastes, population demographics, advertising or marketing efforts, government policies or regulations affecting ...
What are the factors and types of demand? ›
Factors affecting Demand
Income changes the preferences of individuals, and therefore, affects the need. Change of Price: The demand for a product depends on its price. If it increases, then its demand goes down and vice-versa. Promotion: Marketing and promotion are vital to the demand factor.
What are the factors affecting the demand? ›
The demand for a commodity is also affected by tastes and preferences. It rises if there is a favourable change in the tastes and preferences of the consumer and vice versa. Future expectations about price and income also affect the demand for a commodity in the present.
What are the 4 types of demand in economics? ›
The different types of demand are as follows:
- i. Individual and Market Demand: ...
- ii. Organization and Industry Demand: ...
- iii. Autonomous and Derived Demand: ...
- iv. Demand for Perishable and Durable Goods: ...
- v. Short-term and Long-term Demand:
Demand simply means a consumer's desire to buy goods and services without any hesitation and pay the price for it. In simple words, demand is the number of goods that the customers are ready and willing to buy at several prices during a given time frame.
What are the two types of demand? ›
The two types of demand are independent and dependent. Independent demand is the demand for finished products; it does not depend on the demand for other products. Finished products include any item sold directly to a consumer.
What are the 4 shift factors of demand and how each affects demand? ›
Factors that can shift the demand curve for goods and services, causing a different quantity to be demanded at any given price, include changes in tastes, population, income, prices of substitute or complement goods, and expectations about future conditions and prices.
What does factors affecting demand mean in economics? ›
We defined demand as the amount of some product that a consumer is willing and able to purchase at each price. This suggests at least two factors, in addition to price, that affect demand. “Willingness to purchase” suggests a desire to buy, and it depends on what economists call tastes and preferences.
What is the law of demand and factors affecting demand? ›
The law of demand states that the quantity purchased varies inversely with price. In other words, the higher the price, the lower the quantity demanded. This occurs because of diminishing marginal utility.
What are the factors affect demand and factors that affect supply? ›
Factors such as taxes and government regulation, the market power of suppliers, the availability of substitute goods, and economic cycles can all shift the supply or demand curves or alter their shapes.
7 types of demand
- Joint demand. Joint demand is the demand for complementary products and services. ...
- Composite demand. Composite demand happens when there are multiple uses for a single product. ...
- Short-run and long-run demand. ...
- Price demand. ...
- Income demand. ...
- Competitive demand. ...
- Direct and derived demand. ...
- Expectations.
Demand can be of the following types: Market demand. Individual demand. Cross demand.
What are the three types of market demand? ›
Market demand can be classified into seven types, each with unique characteristics:
- Negative Demand: This occurs when a product isn't desired by customers due to various reasons. ...
- Unwholesome Demand: ...
- Non-existing Demand: ...
- Latent Demand: ...
- Declining Demand: ...
- Irregular Demand: ...
- Full Demand:
The three characteristics of the demand curve are price (on the vertical axis), quantity (on the horizontal axis) and curve that shows demand by connecting two axes.
What is the basic law of demand? ›
The law of demand states that when the price of a product goes up, the quantity demanded will go down – and vice versa.
What three factors determine a product's elasticity? ›
Factors that determine the demand elasticity for a product include price levels, the type of product or service, income levels, and the availability of substitutes. Luxury items are highly elastic.
What are the types of demand available in the market? ›
There are 8 states of demand: negative demand, no demand, latent demand, falling demand, irregular demand, full demand, overfull demand and unwholesome demand. One must understand how to manage the demand state. For each state of demand, there is a marketing task and a marketing technique.
What are the three factors the demand for your product demands on? ›
The demand for your product demands on three factors; the price of your good, the price of a related good, and the average income of your customers.
What are the 4 factors that affect price? ›
Four Major Market Factors That Affect Price
- Costs and Expenses.
- Supply and Demand.
- Consumer Perceptions.
- Competition.
1)Effective Demand. 2)Latent Demand. 3)Derived Demand.
