What is Demand?

What is Demand?

Demand refers to the quantity of goods & services that the consumers are willing to purchase and are able to afford at the different prices at a given period of time. To constitute a demand, only desire to purchase any goods & services is not enough but desire should be accompanied by the means of purchase and the willingness to use that means of purchase to purchase the required product or service.

Explanation with example:

The Demand is the quantity of a product or service that the consumers desire to purchase and are able to purchase at a specified price and in a given time period. Demand is an activity and not a state of mind.

For example A consumer, Mr. Y demands 100 dozens of oranges in the month of May at a price of $10 per dozen. The above example is complete example of demand as it contains all the three important elements that are required to constitute a demand i.e. price of a commodity, quantity of a commodity and a specified time period.

Features of demand:

The features of demand are as follows:

  1. The demand of the goods & services depends upon the utility of a product or service as the consumer demands such product that can fulfill the necessity of the consumer.
  2. The demand is always considered as effective demand which means that desire to purchase any product or service is always backed up with the ability to purchase and willingness to pay.
  3. Demand in not a single isolated purchase rather it is a continuous flow of purchases and therefore demand is always expressed as demand of a Product or service per period of time such as one hundred dozens of mangoes per week, two thousand units of chocolate per month etc.
  4. Demand is always seen as the demand of final product or service.

Demand function:

The relationship between the demand of a commodity (dependent variable) and the various determinants of demand (independent variable) is expressed as demand function. In other way demand function can be expressed as:

Dk= f(Pk, Py, Pc, Y, T, E,N, Yd)

Where,

Dk= Demand of the commodity K

Pk = Price of the commodity K

Py = Price of its competing good or substitute

Pc = Price of its complementary good

 T = Consumer’s Taste & Preferences

E = Consumer’s Expectations

N = Number of consumers

Yd= Distribution of Income

Individual demand function & Market demand Function

The demand function that shows the relationship between demand for the commodity by an individual consumer & various determinants of demand is known as individual demand function.

The demand function that shows the relationship between demand for the commodity by the overall market(sum of individual demands) & various determinants of demand in a given time period is known as Market demand function.

Table below shows various factors that affect individual demand and market demand:

Individual Demand FunctionMarket demand function
1. Price of the commodity
2. Price of the related goods (complimentary and competing goods)
3. Consumer’s Income  
4. Consumer’s Taste & Preferences
5. Consumer’s Expectation  
1. Price of the commodity
2. Price of the related goods (complimentary and competing goods)
3. Consumer’s Income
4. Consumer’s Taste & Preferences
5. Consumer’s Expectation
6. Distribution of Income
7. Population Size & composition   8. Number of Consumers  

Final Thought:

Thus, demand of the commodity is the desire and ability to purchase specified product or service within a given time period and at a specified price. The demand of the commodity is affected by various factors both at individual level and overall market level.

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Related Article:

  1. DETERMINANTS OF DEMAND
  2. LAW OF DEMAND
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