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Tutorial Topic: What is demand? definition, type, example, determinants of demand.
A market is a place where individuals, households, and businesses are engaged in the buying and selling of products and services through various modes.
The working of a market is governed by two forces, which are demand and supply. These two forces play a crucial role in determining the price of a product or service and size of the market.
Table of Contents
Introduction of Demand
In economics, Demand is a relationship between various possible prices of a product and the quantities purchased by the buyer at each price. In this relationship, price is an independent variable and the quantity demanded is the dependent variable.
In a market, the behavior of consumer can be analysed by using the concept of demand.
What is Demand?
Demand is an economic principle can be defined as the quantity of a product that a consumer desires to purchase goods and services at a specific price and time.
Factors such as the price of the product, the standard of living of people and change in customers’ preferences influence the demand. The demand for a product in the market is governed by the law of demand.
Meaning of Demand
In economics by demand, we mean the various quantities of a given good or service which buyer would purchase in one market during a given period of time, at various prices, or at various incomes, or at various prices of related goods.
Economist has given different demand definition but essence is same.
Frederic Charles Courtenay Benham defines demand as “The demand for anything i.e; goods and service, at a given price, is the amount of it, which will be bought per unit of time, at that price.
- Demand is always referred to in terms of price and bears no meaning if it is not expressed in relation to price.
For example, an individual may be willing to purchase a shirt at a price of ` 500 but may not be willing to purchase the same shirt if it is valued at ` 1000. In addition, different quantities of a commodity are demanded at different prices.
- Demand is always referred in terms of a time period and bears no meaning if it is not expressed in relation to a time period.
For example, a garment manufacturer has a demand for 200 metres of cloth in a month or 2400 metres of cloth in a year. a statement referring to demand for a commodity or service must include the following three key factors: The quantity to be purchased. The price at which the commodity is to be purchased. The time period when the commodity is purchased.
Types of Demand
- Price demand
- Income demand
- Cross demand
- Individual demand and market demand
- Joint demand
- Composite demand
- Direct and derived demand
Determinants of demand
- Price of a commodity
- Price of related goods
- The income of consumers
- Tastes and preferences of consumers
- Consumers’ expectations
- Credit policy
- Size and composition of the population
- Income distribution
- Climatic factors
- Government policy
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