Demand

Meaning of Demand: Demand of commodity refers to the quantity of a commodity

which a consumer is willing to buy at a given price, and time.

Market Demand: Market Demand refers to the sum total of the quantities demanded
by all the individual households in the market at various prices in given time.

Demand Function: Demand Function is the functional relationship between demand

and factors affecting demand.
Dx = f (Px, Po, Y, T, E)
Factors affecting Demand:- Following are the factors which affect the Demand.
1. Price of Commodity: When the price of commodity rises demand of commodity
will decrease and vice-versa.
2. Price of other related commodity: Price of other commodity affect the demand
of commodity in two ways:
a) Substitute Goods:- In the case of substitute goods, the demand for a commodity
X rises with a rise in the Price of commodity Y and vice versa.

Example- Tea and coffee

b) Complementary Goods:- In case of complementary goods, the demand for a

commodity X rises with the fall in the Price of commodity Y and vice versa.

Example: Car and Petrol, Ink and Pen,

3. Income of Consumer: - When the Income of Consumer rises the demand of

normal goods increases and if the income decreases the demand of normal good
decreases.

In case of Inferior good the demand will decrease with rise in income and
increase with decrease in income.

4. Taste and Preference: - If the taste and preference of consumer develop for a
commodity the demand will rise.
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5. Expectation: - If the consumer expects that price in future will rise the demand
will rise and vice-versa

6. Population: - More population, more demand, less population less demand.

7. Climate: - The demand of commodity changes according to the climate.

Law of Demand: - Other things being equal, the demand for a good rises with a
decrease in price and decreases with increase in price.

Y
Explanation
Price
D

P1
Px Qx
P
10 100
P2
9 150
D
Q1 Q Q2
X
8 200 O Demand

The table shows when price decreases the demand increases. Demand curve
DD shows more quantity (OQ1) and lower Price (OP1)
Inferior Goods: - These are the goods for which demand rises with decreases
in income of consumer. In other words income effect is negative.
Giffen Goods: - Those inferior goods whose income effect is negative but price
effect is positive.
Change in Quantity demanded: - It is also called movement along a demand
curve. Due to change in its own price, quantity of commodity changes. There
are two type of change in quantity of Demand (a) Extension in Demand (b)
Contraction in Demand.
Change in Demand: - It is also called shift in demand curve. When quantity of
commodity change due to change in factor other than price. It has two types-
a) Increase in Demand b) Decrease in Demand