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Demand for a commodity is the desire to possess that commodity backed up by a willingness and
ability to pay for it.
Demand is always mentioned in relation to time period and place. For example, we can say the
demand for televisions in Baroda was 100000 units during the year 2013.
Types of Demand
Individual and Market Demand: The quantity of a commodity which an individual is willing to
buy at a particular price during a specified time, given his income, tastes and preferences and
prices of related commodities is called individuals demand for the commodity.
All the individuals demands when added together is called the market demand
Demand for a firm and Industry demand: The quantity of a firms product that can be sold at a
given price over a specified time period is called the demand for the firm.
The aggregate of demand for the product of all the firms in the industry is called the industry
demand.
Autonomous and derived demand:An autonomous or direct demand is the one that arises on its
own out of a natural desire to consume a commodity. It is independent of the demand for any
other commodity.
A derived demand is one which arises because of the demand for some other commodity called
parent product.
Demand for durable and nondurable goods:
Goods whose total utility or usefulness is not exhausted in a single or short run use are called
durable goods.
Non durable goods on the other hand are those which can be used only once.
Durable goods create replacement demand whereas nondurable goods do not.
The demand for non durable goods increases or decreases lineally whereas that of durable goods
does exponentially because the of an increase in stock of durable goods and hence accelerated
depreciation.
Short term and Long Term demand: Short term demand for goods is the demand of goods which
are demanded over a short period of time.
Long term demand on the other hand is the demand for goods which exists over a long time.
Determinants of Demand
In general, there are certain factors which affect the demand for a particular commodity. They are
called the determinants of demand.
1. Price of the product
2. Price of related goods substitutes and complimentary goods.
Substitute Goods: These are the goods that can be used instead of the goods under
consideration. E.g Tea and Coffee
Complimentary Goods: these are the goods which are used jointly with the goods under
consideration. They cannot be used in isolation. E.g Auto and tyre.
With this increase in real income, he can purchase more of the commodity for the same amount
of money.
Other Reasons: There are other reasons also for the law of demand. They are1. New Consumers: When the price of a commodity is reduced then many other consumers who
were not consuming the commodity earlier because of its high price also start using the
commodity. This increases the demand for the commodity.
2. Different uses of the commodity: when the price of a commodity is high, it is used only for
the more important purposes. When the price is reduced, the commodity will be put to many
other uses where it was not being used earlier. This will increase its demand.
Exceptions to the Law of Demand: The law of Demand is applicable to only normal goods.
There are certain exceptions for which the law of demand does not hold good. They are1. Inferior goods or Giffen Goods: Giffen goods are inferior goods whose demand decreases
with a decrease in their price. For example in India, jowar, bajra are Giffen Goods, wheat or rice
being the superior goods.
This because, jowar and bajra are substitutes of wheat in India.
When the price of bajra is reduced, there is an increase in the real income of the consumer. With
this increase in real income, he does not buy more of bajra, but rather buys more of wheat, and
reduces the quantity of bajra proportionately. Thus the quantity of bajra demanded reduces even
if the price is reduced.
2. Articles of Distinction or Snob Appeal: The demand for articles of distinction like diamond
and jewellry is more when the price is high. This is because these goods have snob appeal and a
rich mans desire for distinction is satisfied better when the articles of distinction are highly
priced and the poorer cannot buy them.
3. Speculative Goods: There are many commodities whose prices are expected to fall or rise in
the future. In such cases, if people expect a price rise in future, they will rush to purchase more
of the commodity at the present price. If they expect the price to fall, they will purchase less of
the commodity to derive benefit from the fall in price later on.