In our daily life, we often see that a consumer’s preferences for a product changes according to their preferences, income, and the prices of the goods or prices of 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 taste. Whenever there is a change in any of those variables than the demand and supply of a product starts changing.
Related Links: Elesticity of Demand
Types of Demand
- Market or Individual Demand- Here, the individual demand is defined as the demand for a products or services by an individual consumer. And the market demand can be defined as a demand of a product made by a bunch of consumers who buy that product. Therefore, the market demand is a collective demand of each individual’s demand.
- Direct or Derived Demand: The direct demand is defined when a goods manufactured is related with the demand for another product is known as the derived demand. For example; the demand for a silk yarn is the result of the demand for a silk cloth. However a direct demand of a goods can defined when the demand of a product is independent. For example, there is an autonomous demand for a cotton cloth.
- Price Demand- The price demand refers to the amount of a 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 subject to its own price, but the price of other similar products is known as the cross demand.
|6 Marks Question|
|Q.1 Define demand. Explain any four important factors that affect demand for a commodity.|
|(A) Definition of demand||
|(B) Following are the important factors that affect demand of a commodity:|
|(a) Own price of the given commodity||[Pi20 Car Di20 Car] [Pi20 Car Di20 Car]…Inverse Relation
|(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 – SUBSTITUTE AND COMPLEMENTARY
(i) SUBSTITUTE GOODS
(ii) COMPLEMENTARY GOODS
|(c) Income of the consumer||[IncomeHouseholdDNormal Goods]…Direct Relation
[IncomeHouseholdDInferior Goods]…Inverse Relation
(i) Normal Goods (Positive relation)
These are the goods whose demand rises with the rise in income. E.g. Basmati Rise
(ii) Inferior Goods (Negative relation)
These are the goods whose demand falls with the rise in income and vice versa. e.g. Low quality rice.
A third category is also there, necessities, demand for these generally do not change with change in income e.g. life-saving drugs.
|(d) Taste and preferences of the consumer||
Also Read: What is Demand in Economics?
- None of the above
- Normal goods
- Necessity goods
- Inferior goods
- None of the above
Answer: Necessity goods
- Not related
- Jointly demanded