What is 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.
Preferences and choices are the basics of demand, and can be
described in terms of the cost, benefits, profit, and other variables.
The amount of goods that the customers pick, 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, is able to
manage and afford at provided prices of goods, and customer’s
tastes and preferences are known as demand for the commodity.
Determinants of Demand
There are many determinants of demand, but the top five
determinants of demand are as follows:
Product cost: Demand of the product changes as per the change in
the price of the commodity. People deciding to buy a product remain
constant only if all the factors related to it remain unchanged.
The income of the consumers: When the income increases, the
number of goods demanded also increases. Likewise, if the income
decreases, the demand also decreases.
Costs of related goods and services: For a complimentary product,
an increase in the cost of one commodity will decrease the demand
for a complimentary product. Example: An increase in the rate of
bread will decrease the demand for butter. Similarly, an increase in
the rate of one commodity will generate the demand for a substitute
product to increase. Example: Increase in the cost of tea will raise the
demand for coffee and therefore, decrease the demand for tea.
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Consumer expectation: High expectation of income or expectation in
the increase in price of a good also leads to an increase in demand.
Similarly, low expectation of income or low pricing of goods will
decrease the demand.
Buyers in the market: If the number of buyers for a commodity are
more or less, then there will be a shift in demand.
Types of Demand
Few important different types of demand are as follows:
1. Price demand: It refers to various types of quantities of goods
or services that a customer will buy at a quoted price and given
time, considering the other things remain constant.
2. Income demand: It refers to various types of quantities of
goods or services that a customer will buy at different stages of
income, considering the other things remain constant.
3. Cross demand: This means that the product’s demand does not
depend on its own cost but depends on the cost of the other
related commodities.
4. Direct demand: When goods or services satisfy an individual’s
wants directly, it is known as direct demand.
5. Derived demand or Indirect demand: The goods or services
demanded or needed for manufacturing the goods and
satisfying the consumer indirectly is known as derived demand.
6. Joint demand: To produce a product there are many things
that are related to each other, for example, to produce bread,
we need services like an oven, fuel, flour mill, and more. So, the
demand for other additional things to produce a product is
known as joint demand.
7. Composite demand: A composite demand can be described
when goods and services are utilised for more than one cause.
Example: Coal
