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Demand
In our daily life, we often hear the word ‘demand’ for goods or services. In the business
world, the demand of a product determines its value and the profit or loss of a
company. So, today in this article, we will understand ‘what actually is demand? and ‘why
is it so important for a business?’

What is demand?
Demand simply means a consumer’s desire to buy goods and services without any
hesitation and pay the price for it. In simple words, demand is the number of goods that
the customers are ready and willing to buy at several prices during a given time frame.
Preferences and choices are the basics of demand, and can be described in terms of
the cost, benefits, profit, and other variables.

The amount of goods that the customers pick, modestly relies on the cost of the
commodity, the cost of other commodities, the customer’s earnings, and his or her
tastes and proclivity. The amount of a commodity that a customer is ready to purchase,
is able to manage and afford at provided prices of goods, and customer’s tastes and
preferences are known as demand for the commodity.

Suggested reading: Elasticity of Demand

The demand curve is a graphical depiction of the association between the price of a
commodity or the service and the number demanded for a given time frame. In a
typical depiction, the cost will appear on the left vertical axis. The number (quantity)
demanded on the horizontal axis is known as a demand curve.

Determinants of Demand
There are many determinants of demand, but the top five determinants of demand are
as follows:

Product cost: Demand of the product changes as per the change in the price of the
commodity. People deciding to buy a product remain constant only if all the factors
related to it remain unchanged.

The income of the consumers: When the income increases, the number of goods
demanded also increases. Likewise, if the income decreases, the demand also
decreases.

Costs of related goods and services: For a complimentary product, an increase in the
cost of one commodity will decrease the demand for a complimentary product.
Example: An increase in the rate of bread will decrease the demand for butter. Similarly,
an increase in the rate of one commodity will generate the demand for a substitute
product to increase. Example: Increase in the cost of tea will raise the demand for
coffee and therefore, decrease the demand for tea.

Consumer expectation: High expectation of income or expectation in the increase in

price of a good also leads to an increase in demand. Similarly, low expectation of income
or low pricing of goods will decrease the demand.

Buyers in the market: If the number of buyers for a commodity are more or less, then
there will be a shift in demand.

You may also want to know: What are the Shifts in the Demand Curve?

Types of Demand
Few important different types of demand are as follows:

1. Price demand: It refers to various types of quantities of goods or services that a customer
will buy at a quoted price and given time, considering the other things remain constant.
2. Income demand: It refers to various types of quantities of goods or services that a customer
will buy at different stages of income, considering the other things remain constant.
3. Cross demand: T his means that the product’s demand does not depend on its own cost but
depends on the cost of the other related commodities.
4. Direct demand: When goods or services satisfy an individual’s wants directly, it is known as
direct demand.
5. Derived demand or Indirect demand: T he goods or services demanded or needed for
manufacturing the goods and satisfying the consumer indirectly is known as derived
demand.
 6. Joint demand: T o produce a product there are many things that are related to each other,
for example, to produce bread, we need services like an oven, fuel, flour mill, and more. So,
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the demand for other additional things to produce a product is known as joint demand.
7. Composit e demand: A composite demand can be described when goods and services are Name
utilised for more than one cause. Example: Coal

Must read: What is indifference curve analysis? Mobile Number

The Law of Demand City

The law of demand is interpreted as ‘the quantity demanded of a product comes down
if the price of the product goes up, keeping other factors constant.’ In other words, if Grade/Exam
the cost of the product increases, then the aggregate quantity demanded decreases.
This is because the opportunity cost of the customers increases that leads the Email Address
customers to go for any other substitute or they may not purchase it. The law of
demand and its exceptions are really inquisitive concepts.
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Consumer proclivity theory assists us in comprehending the combination of two
commodities that a customer will purchase based on the market prices of the
commodities and subject to a customer’s budget restriction. The amount of a
commodity that a customer actually purchases is the interesting part. This is best
elucidated in microeconomics utilising the demand function.

Also, read: Factors affecting the demand of a commodity

This is the detailed and elucidated information about the concept of demand. To learn
more about such concepts, stay tuned to BYJU’S.

Import ant t opics in economics:

Consumer Protection Act

Circular Flow of Income
Consumer Equilibrium
Central Problems of an Economy

Frequently Asked Questions on Demand

Q1 What are two types of demand?

Two types of demand are:

1. Joint demand
2. Composite demand

Q2 Who developed the concept of demand?

Alfred Marshall developed the concept of demand.

Q3 What are the 6 factors that affect demand?

The factors that affect demand are as follows:

1. Price of product
2. Consumer’s Income.
3. Price of Related Goods.
4. Tastes and Preferences of Consumers.
5. Consumer’s Expectations.
6. Number of Consumers in the Market.

Q4 What is the basic law of demand?

Basic law of demand states that price and quantity demanded are inversely related
to each other while keeping all other factors constant. Increase in price lowers the
demand for any goods or services.

Q5 What increases demand for a normal good?

Demand for normal goods increases with respect to rise or increase in consumer’s
income.

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