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
|(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.
(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
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
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?
c. Not related
d. Jointly demanded
Answer: a. Substitutes