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What is Demand?

Demand is defined as quantity of commodity which a person is willing to buy at a certain price at a particular time and at a particular place. Demand=Desire+Willingness+Readiness+Capacity

Definition of Demand The demand for a particular good is the amount that will be purchased at a given price and at a given time.

Types of Demand
Price demand-price demand expresses the relationship between the price and demand of a commodity,other things being equal. Dx=f(px)

Income demand-Income demand expresses the relationship between income of the consumer and quantity demanded of a commodity,other things remain same. Dx=f(y)

Cross demand-cross demand expresses the relationship between the quantity demanded of good x and the price of related goods y,other things remain same. dx=f(py)

TYPES OF GOODS
1-substitute goods-A rise in price of good y (coffee)raises the demand for good x(tea).similarly a fall in the price of y,the demand for x falls.

2-complementary goods-A fall in the price of one good y(say car) will raise the demand for good x(say petrol).conversely a rise in the price of y will bring a fall in the demand for x.

3. Joint or complementary goods-when to satisfy a particular want,two or more than two goods are demanded simultaneously,then such a demand is called joint demand.goods which are jointly demanded are also known as complementary goods.

4.Consumer goods and producers goods demandconsumers goods are goods used for final consumption e.g.food items,readymade clothes,houses. producers goods are used for production of other goods ,such as machine,tools,raw materials. demand for consumers goods is also termed as direct demand direct demand,as these goods are demanded not for final consumption but for the production of other goods.

5.Perishable and Durable goods-Both consumers and producers goods are further divided into perishable and durable goods. Perishable goods are those which can be consumed only once,while Durable goods are those which can be used more than once over a period of time.

Determinants of Demand
1.price of the commodity-Basically,demand for a comodity depends upon its price.if the price rises,the demand falls and if price falls the demand rises. 2.Price expectations-Demand is also influenced by expected changes in price. 3.Price of related goods-The demand for a commodity is also influenced by changes in the price of related goods like substitutes and complementaries. 4. Income of the consumer-income levels determine the demand to a great extent.normally there is direct relationship between income and demand.in case of normal goods ,if income rises demand increases and if income falls demand decreases.

5.Populationdemand for commodities depends upon the size of population.increase in population leads to more demand for all types of goods and decrease in population leads to a fall in demand. 6. Taste and preferences- these terms are used in broad sense.they include habit,custom etc.taste and preferences of the consumers are influenced by advertisement,climate and new inventions etc.demand for those goods goes up for which consumers develop taste.on the other hand,demand for a particular good will go down if people have no liking for that. 7.Distribution for Income- demand is also influenced by the distribution of income in the society.if income is equitably distributed there will be more demand.if income is not equitably distributed there will be less demand.

8.Discoveries-if new substitutes are discovered,they may decrease the demand for original products.

9.Money supply-supply of money,determines the purchasing power of money.when money supply increases,people acquire more purchasing power,thus increasing the demand for goods and services.if money supply falls,demand for goods also falls.

Demand function
>Demand function is a comprehensive formulation which specifies the factors that influence demand for the product. dx=f(Px,Pr,y,t.etc)

Here dx means the demand for a commodity x,the word f shows the functional relationship between the demand of x and the other variables i.e.,,pr which refers to the prices of related goods or the prices of substitutes and complementary goods,y represents the income of the consumer while T is an indicator of their tastes and preferences.

Demand schedule
Demand schedule is a table which shows relationship between price and quantity demanded. demand schedule is of two types1. INDIVIDUAL DEMAND SCHEDULE 2. MARKET DEMAND SCHEDULE

1-Individual demand schedulean individual demand schedule is a schedule or a list of various quantities of a commodity which an individual consumer purchases at a different prices in the market

Individual demand schedule is as belowprice of milk per kg (in rs) 5 4 3 2 1 quantity demanded (in kg) 1 2 3 4 5

2-Market demand schedule-market demand schedule is a schedule which represents different quantities of commodity which all consumers will buy at all possible prices at a given moment of time. dm=da+db++dn where dm is the market demand schedule and da+db+.+dn are individual demand schedules.

price of milk demand of per kg(in rs) mr x (kg) 5 1 4 2 3 3 2 4 1 5

demand of mr y(kg) 2 3 4 5 6

market demand 1+2=3 2+3=5 3+4=7 4+5=9 5+6=11

Law of demand
In the words of Dr Marshall, The law of demand states that amount demanded increases with a fall in price and the diminishes with a rise in price

Assumptions
1.No change in the income of the consumer. 2.No change in the prices of related goods. 3.There should be no expectation of any change in the future prices of commodity. 4.Consumers tastes,preferences and choices remains constant. 5.No substitutes for the commodity in question are available.

.TABLE

Price 5 4 3 2 1

Quantity 10 12 15 20 30

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