Demand and law of demand

what is the meaning of demand

demand for a commodity refers to the quantities of a commodity which consumers are willing to purchase at various possible prices during a particular period of time

what are the remarks that need to be noted in the meaning of demand

1. demand is accompanied by the desire and willingness to purchase and the power to purchase
2. it is always related to price , for a given price demand tells us a specific quantity that consumers are willing to purchase at that price
3. it is expressed in a flow (meaning time per unit) how much is purchased in that particulate time (trend)

what are the types of demand

- derived demand
- individual and market demand
- ex ante and ex post demand
- composite demand
- joint demand

what are individual demand/ household demand

refers to the quantities of commodity that an individual consumer is willing to purchase at various prices during a given period of time

what is market demand

it refers to the total quantities of demand refers to the total quantities of a commodity that all households are willing to buy at various prices in a given period of time

what is ex ante and ex post demand

ex ante - amount of goods and services they are willing to buy
ex post - amount of goods and services they ACTUALLY purchase

what is joint demand

refers to the demand for two or more goods which are used jointly or demanded together ex- car and petrol
(direct positive relationship)

what is derived demand

the demand that arises because of the demand for some other commodity ex- demand for steel increases due to the increase in demand of building houses

composite demand

Demand for a good which has more than one use e.g. land for housing or a factory.

what are the determinants of demand (factors of influence )

- price of a commodity
- income of consumer
- consumers taste and preferences
- prices of related goods
- distribution of income
- size and composition of population
- climate factors

what are normal goods

normal goods are those goods the demand for which increase with increase in income of the consumer and decreases with fall in income

inferior goods

which superior substitutes are available are called inferior goods . they are the demand which falls with increase in income of the consumer and increases with fall in income
( less in income - inc in sub)
(more income - dec in sub)

what are demand functions

states the relationship between the demand for a product and its various determinants

what is the law of demand

the law of demand states that other things remaining equal , the quantity demanded of a commodity increases when its price falls and decreases when the prices increases

assumptions of the law of demand

- no change in income of the consumer
- no change in taste and preferences
- price of the related commodities should remain unchanged
- commodity should be a normal commodity

demand schedule

a tabular statement that shows different quantities of a commodity that would be demanded at different prices during a given period of time

individual demand schedule

table which shows various quantities of a commodity that would be purchased at different prices by an individual household or a consumer during a given period of time It reflects the relationship between price and quantity demanded for a single consumer.

Market demand schedule

table that shows the total quantities of a commodity that all consumers in a market would and are willing purchase at different prices during a given period of time.

demand curve

a graphical representation of the demand schedule, illustrating the relationship between price and quantity demanded for a commodity.

Individual demand curve

a graphical representation of the individual demand schedule, showing the relationship between price and quantity demanded by a single consumer.

Market demand curve

a graphical representation of the market demand schedule, illustrating the total quantity demanded by all consumers at various price levels in a market when all the factors affecting demand are considered same

reasons of downward sloping demand curve (right to left)

• law of diminishing marginal utility

• income effect

• substitution effect

• increase in number of consumers

• several uses of commodity

exceptions of law of demand

• giffen goods

• expectations about future prices

• emergencies

• change in trend