Question

Define or explain the following concepts:

1. Demand

2. Increase in demand

3. Derived demand

4. Direct demand

5. Market demand schedule

Answer 1

1. Demand for a commodity refers to the quantity of a commodity that a consumer is willing and is able to purchase at a particular price at any particular point in time. For example, a consumer demands 2 kg sugar at Rs 10 per kg and 3 kg sugar at Rs 8 per kg.

2. When the demand for a good increases with the change in factors other than the price of the good, it is called increase in demand. Some of the factors that lead to increase in demand is rise in income, developing a taste and preferences for the commodity, rise in the price of related goods, etc. Graphically, an increase in demand is represented by a parallel rightward shift of the demand curve.



3. When goods are demanded so that they can be used in the production of some other commodity, it is called indirect or derived demand. Thus, in such cases the demand for a commodity is dependent on the demand for the commodity in the production of which it would be used. For instance, when wood is demanded for making furniture, wood is said to have derived demand. As the demand for furniture increases, the demand for wood also increases and vice-versa

4. Demand for the goods that are purchased for direct consumption and are not used as intermediate goods is referred to as direct demand. For instance, goods like clothes and food have a direct demand, as they are meant for final consumption. The demand for such goods does not depend on the demand for any other commodity.

5. The market demand schedule shows the aggregate (total) demand for a product by all consumers in the market at different prices. The following is a market demand schedule.

Market Demand Schedule:

Price of X (Rs)	Quantity Demanded by Consumer 1 (Units)	Quantity Demanded by Consumer 2 (Units)	Market Demand (Units)
10	5	6	5 + 6 = 11
15	4	5	4 + 5 = 9