Demand is a financial term that alludes to how many items or administrations customers wish to buy at some random cost level. The simple longing of a buyer for an item isn’t demand. In this topic we will read Demand Curve and the Law of Demand, Normal and Inferior goods and the difference between them. Demand incorporates the buying force of the purchaser to get a given item at a given period. As such, it’s how much items or administrations that buyers are willing and ready to buy.
What is the definition of demand in economics?
Demand is an economic theory that refers to a consumer’s desire to buy products and services and their readiness to pay the price for them. If all other conditions remain constant, a rise in the price of goods and services will reduce demand, and vice versa.
Demand Curve and the Law of Demand
“Quantity demand of a product diminishes if the cost of the product increases,” according to the Demand Curve and the Law of Demand. When the price of a product rises, the quantity demanded decreases. Because the consumer’s opportunity cost rises, consumers will seek out other options or refuse to purchase it. The law of demand and its exceptions are interesting principles with numerous applications in real life.
Types Of Demand:
- Individual and market demand
Individual demand is the need of a single person or a home. It represents the amount of a product that a single customer would purchase at a certain price point and at a given period. Market demand pertains to the demand for a commodity or service by all customers at a certain price, taking into account other elements such as tastes, money income, and preferences, as well as the pricing of other goods. Because it portrays the condition of the market for an item or service, it is called market’ demand.
2.Organisation and industry demand
This term refers to the market-based categorisation of demand. Organisation demand is the desire for an organisation’s products at a certain price over a period of time. Toyota cars, for example, are in high demand among businesses.
- Autonomous and Derived Demand:
This term refers to the categorisation of demand based on its reliance on other products. Autonomous or direct demand refers to demand for a product that is not linked to the demand for other products. The autonomous demand stems from an individual’s intrinsic desire to consume the product.
- Demand for Durable Goods and Perishable :
It refers to the classification of demand based on the use of goods. There are two types of goods: perishable goods and durable goods.
Perishable or non-durable goods are goods with a single use. Cement, coal, fuel, and food are a few examples.
- Short-term and Long-term Demand:
Short term demand represents the categorization of demand as per the time period.
Factors affect demand in microeconomics.
The demand for goods and services is directly dependent on the income of people.
- Number of consumers.
By adding up the individual wants of current and potential customers of a good at various conceivable. Number of consumers’ prices, the market’s demand for that good is impacted. The market demand for a good increases as the number of consumers increases. When more and more people choose to substitute items to a given commodity, an increase in customers can occur. The number of substitute buyers will increase as a result. The demand for a given commodity might increase as a seller expands to a new market to distribute goods, or when the population grows.
- Consumers’s taste and preferences
The consumer’s tastes and preferences have a direct impact on the demand for goods. This can be applied to fashion items, rituals, and habits, among other things. For example, if a fashion commodity is popular and preferred by people, demand for that commodity will almost certainly increase. Demand for it, on the other hand, will diminish if buyers have no taste or preference for it.
- Consumer’s expectation
Consumers’ predictions about future costs of products are another element that drives demand for goods. If the price of a commodity is predicted to rise in the near future, consumers will purchase more of it than they normally would. They will not have to pay a greater price in the future if this occurs. People will rush for gasoline if the price is predicted to rise in the coming days. Similarly, if customers anticipate lower costs for items in the future, they will postpone some of their current consumption, lowering their current demand for commodities.
What do you mean by Normal and Inferior Goods?
When other goods are provided, the demand function is a link between the customer’s demand for a commodity and its cost. Rather than investigating the relationship between demand for an item and its cost, we might look at the relationship between the customer’s demand for the product and his or her earnings.
The demand for a few commodities moves in the opposite direction of the customer’s profits. Such items are referred to as inferior goods.
As the customer’s earnings rise, the desire for inferior items falls, and as the customer’s earnings fall, the demand for poorer goods rises. Low-quality food items, such as cereals, are examples of inferior goods.
At some levels of income, a commodity can be a typical commodity for the customer, whereas at other levels of income, it can be an inferior commodity. Customers’ demand for low-quality cereals might rise in tandem with their earnings at very low levels of wages.
In the above topic we have read about study on Demand Curve and the Law of Demand. The demand curve is the relationship between price and quantity demand. In an economy, people seek commodities and services to meet their needs, such as food, healthcare, clothing, entertainment, shelter, and so on. There are various factors such as price, customer demand, customer’s expectations and number of the customers. So, go through the above notes for the better understanding of the concept.