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Concept & Meaning of Demand

1- Concept & Meaning
Generally, demand refers to a desire or want of anything, but a mere desire or want of anything is not a demand. In economics, to be a demand for any goods or services three of the elements are required i.e. a strong desire for goods or services, ability to pay the prices and willingness to pay. So the demand can be defined as the desire for a good or service which is backed up by ability and willingness to pay.
Demand always signifies price, time and place. The demand for a commodity can only be effective if it has a price and is demanded in a market during a certain point or period of time. For example, John’s demand for sugar is 5 kg. It can be his demand for sugar but it is not his effective demand because it just contains quantity but not the price and time. Similarly, Hary's demand for sugar is 5 kg at $2 per kg for week. Hary’s demand for sugar is an effective demand because it not only contains quantity but also price and time. Thus, demand can be defined as the desire for the quantity of a commodity that a consumer willing and able to buy at a price in a market at a specific time.

2- Types of Demand
There are various types of demand. They are as given below;

2.1- Price Demand

2.2- Income Demand

2.3- Cross Demand

2.4- Composite Demand

2.5- Direct Demand

2.6- Derived Demand

2.7- Joint Demand

2.1- Price Demand
Price demand refers to the various goods or services that a consumer demands at various prices in a market at a certain time, other things remaining the same. There is a negative relationship between the price and goods demanded.

Symbolically,
Qd = fP
Where,
Qd = Quantity of a commodity demanded,
    f = Function,
   p = Price of the commodity,

2.2- Income Demand
Income demand refers to the various quantity of goods or services that a consumer demands at a various level of income in a market at a specific period of time, other things remaining the same. There is a positive relationship between income and quantity demanded but in case of inferior goods, there is an inverse relationship.

Symbolically,
Qd = fY
Where,
Qd = Quantity of a commodity demanded,
    f = Function,
   Y = Income of a consumer,

2.3- Cross Demand
Cross demand refers to the quantity of a commodity that a consumer ready to purchase or demand due to change in the price of some related commodities. The related commodities are of two types, substitutes and complementary. There is direct relationship between substitute goods and inverse relationship between complementary goods. Cross demand can be expressed symbolically as;
Qdx = fPy
Where;
Qdx = Quantity demanded of good-x,
      f = function,
  Py = Price of good-y

2.4-Composite Demand
Composite demand is the demand for a commodity which can be put to several uses, such as demand for electricity, coal, building, packed water etc.

2.5- Direct Demand
The demand for a commodity is said to be direct demand when it is demanded for a direct consumption. Demand for biscuits, chow-men etc. is the direct demand.

2.6- Derived Demand
The demand for a commodity or service is said to be derived demand when it is demanded for producing a final commodity. Demand for raw material, demand for labor etc are the examples of derived demand.

2.7- Joint Demand
The demand for several goods for a joint purpose is said to be joint demand. Demand for potatoes, salt, oil, chili for vegetable is the example of joint demand.

3- Determinants of Demand
There are various factors which influence consumers demand. These factors or determinants are explained as below.

3.1-Price of the same commodity
One of the most important determinants of consumers’ demand is the price of the commodity that the consumer demands. When the price of the commodity rises, the consumer purchases less and less quantity of that commodity and vice versa. So price is the one which determines how much quantity of a commodity is demanded.

3.2-Income of the consumer
A change in income of the consumer also affects the demand for a good. When income of the consumer increases, generally demand for normal goods increases but the demand for inferior commodity falls. On the other hand, demand for normal goods falls with a decrease in income but at the same time the demand for inferior goods like millet, coarse rice etc. increases. Hence income of the consumer is an important determinant of demand.

3.3-Price of related goods
Another determinant of consumers' demand is the price of related goods. The related goods are of two types, i.e. substitutes and complements. In case of substitute goods, quantity demanded of one commodity, say Fanta, increases due to rise in the price of another commodity, say Pepsi and vice-versa (positively sloping demand curve). Likewise, in case of complementary goods, the demand for one commodity, say torch falls due to rise in the price of another commodity, say batteries and vice-versa (negatively sloping demand curve).

3.4-Taste, Habit and Fashion
Taste, habit and fashion also play important role to determine the consumer’s demand. The demand for a particular commodity changes due to change in taste, habit and fashion of the consumer. When the consumer is habitual for any goods or the goods that are flavoring to him, demand for those goods increases. Similarly, when a particular commodity exists on fashion, its demand increases but demand for that commodity falls when it goes out of fashion.

3.5-Advertisement
Advertisement is a medium of motivating and attracting the consumers towards a commodity. When the advertisement of a commodity is repeatedly done, the consumers are naturally attracted towards the commodity and demand for it. Consequently demand for that commodity rises but reverse will be the case for the commodity without advertisement. So advertisement is one of the determinants of consumers' demand.

3.6-Seasons
The seasons also are determinants of consumers' demand for goods and services. In some particular seasons, demand for some certain goods get changed whereas in some other seasons demand for those good falls to the lowest level. For example, demand for cold drinks, cotton clothes etc. goes high in summer season but low in winter season. Likewise demand for woolen clothes, hot drinks etc. goes high in winter but low in summer. Similarly, there is an increase in demand for umbrellas and gumboots in rainy seasons but fall in other seasons. Thus, demand for a commodity is also influenced by seasons.

3.7-Size of population
Size of population is also an influencing factor for quantity demanded of a commodity. When the size of population is big, naturally demand for normal goods is high and vice-versa. Similarly increase or decrease the number of certain age groups determine the demand for particular commodity. For example, increase in the number of children causes demand for playing items like dolls, toys, swings etc.

3.8-An expectation to change in price in future
An expectation to change in the price of a commodity in future also affects demand for the commodity. Demand for the commodity increases when there in an expectation to rise in the price of that commodity in near future and vice-versa.

3.9-Distribution of national income
Distribution of national income also affects the quantity demanded of a commodity. When the distribution of national income is unequal, some people are rich but a majority of people are poor. In such a situation demand for luxurious goods is high but at the same time demand for inferior goods is also high and demand for normal goods is low. When income is equally distributed, the purchasing power of all the people is similar to one another and in such a situation demand for luxurious goods declines, and demand for normal goods increases.

3.9-Taxes
Tax system is also one of the determinants of demand. Imposition of higher rate of direct and indirect taxes to the consumer reduces their purchasing power. Consequently, demand for goods falls whereas tax release increases the real income of the consumer and demand for goods goes up.

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