Demand in Economics

Demand

Introduction

The demand in economics is an important concept that helps understand market performance and behaviour. As the demand increases and supply decreases, it leads to an increase in the price. When the demand is low and supply is higher, it reduces the price. Demand is defined as the increase in the willingness of the consumer to purchase the products or services. When the consumers are willing to pay for a product or service irrespective of its price, it has higher demand. When the demand is high, price is the independent variable, whereas quantity is the dependent variable.

Demand helps in fueling the economy for a business 

Demand is closely related and connected to supply. For businesses, it is necessary to maintain a balance between the price and quantity. If the business or suppliers sell a product or service at a very high price, it might reduce its demand if the competitor offers a lower price. If the suppliers make a product or service available at a lower price, it increases the demand for the product quantity. Hence, as businesses, it is necessary to maintain an equilibrium.

Types of demand in economics

Economic demand is the willingness of a customer to purchase a product or service at a certain price. As a business, it is necessary to understand the types of demand and how it is classified based on various factors.

• Price demand – It is the amount a consumer is willing to spend on purchasing a product or service at a given price and period. In this case, factors like consumer preferences, level of consumer income, and price of related goods remain unchanged.
• Income demand – As income increases, so does lifestyle, and hence there is an increase in demand for a superior, more expensive product or service. For most consumers, demand for better purchases and income is directly proportional to each other.  
• Joint demand – This is the increase in purchasing complementary products necessary for using the main product. For example, there is complementary demand for a TV stand if one purchases a TV.
• Composite demand – It is the purchase of commodities or services that can be used for various purposes. This means a single product can be used for different uses. There is an increase in customers for the iPhone as it has a great camera, is highly secured, and serves hyping status.
• Competitive demand – This occurs when alternative services or products are available for the customer to choose. This means when there is a price fluctuation and decrease in supply, customers might switch to the competitor’s product instead of the regular one.
• Direct and derived demand – Direct demand is the requirement for final products like clothes, phones, cameras, cars etc. The derived demand in economics is an increase in demand for products used in making the final product. The purchase of particular equipment would raise the demand for its components, spare parts, and engineering service.

 The types of demand PDF will help you understand all types of demand and various examples. The PDF has precise information to understand the meaning of demand in economics and its various types.

Essentials of demand in economics

The market is balanced by maintaining an equilibrium in the demand and supply chain. According to Benham, ‘The demand for a product or service at a given price is the amount of it that will be bought per unit time at that price.’ Here are the essentials for demand.

• The consumer has both the need and money to buy a product or service. The consumer behaviour triggers it, and hence the consumer should be willing to use the resources for fulfilling the desire.
• The demand for a commodity is connected to the price of the product.
• The demand for a particular commodity or product is associated with per unit of time (daily, weekly, monthly, yearly etc.)

Determinants of demand in economics 

Many factors affect the demand for goods and services, and these factors are called the determinants of demand.

• The price of the goods or services is an important determinant. With the increase in the price, the demand for quantity falls and vice versa.
• It is also based on the taste and preference of the buyers and the marketing and advertising strength of the company.
• The price of the competitor’s or substitute product is another determining factor. For example, the high price of olive oil might lead customers to buy sunflower oil.
• Purchase of the product in bulk expecting a future increase in price can increase demand and reduce supply.
• A change in a buyer’s income creates a difference in the demand pattern. An increase in the income would make them buy better quality or expensive products. If there is a decrease in income, demand for cheaper products or services will increase.

Conclusion

Demand in Economics is an important concept that indicates a customer’s willingness to buy a certain product or service. In this article, the concept of demand has been explained along with the types of demands. Many types of demand PDF offer detailed descriptions of the types and relatable examples. There are many determinants or factors which are associated with demand. It is a concept that helps companies understand the dynamics of demand and supply and balance it by adjusting the price and quantity.