INTRODUCTION

Demand is an economic term that refers to the amount of products or services that consumers
wish to purchase at any given price level. The mere desire of a consumer for a product is not
demand. Demand includes the purchasing power of the consumer to acquire a given product at a
given period. In other words, it’s the amount of product or services that consumers are willing
and able to purchase. Demand is desire backed by willingness to pay and ability to pay i.e, a
wish to have a commodity does not become demand. A person wishing to have a commodity
should be willing to pay for it and should have ability to pay for it. Thus, a desire becomes
demand if it is backed by willingness to pay and ability to pay. Demand is meaningless unless it
is stated with reference to a price.
Demand is the quantity of a good that consumers are willing and able to purchase at various
prices during a given period of time.1The relationship between price and quantity demanded is
also known as demand curve. Preferences and choices, which underlie demand, can be
represented as functions of cost, benefit, odds and another variable. People demand goods and
services in an economy to satisfy their wants. All goods and services have wants satisfying
capacity which is known as “UTILITY” in economics. Utility is highly subjective concept; it is
different from person to person. Utility is measured by the means of introspection. By demand
for goods and services economists essentially mean in willingness as well as ability of the
consumer in procuring and consuming the goods and services. Thus, demand for a commodity or
service is dependent upon
(a) its utility to satisfy want or desire.
(b) capability of the prospective consumer to pay for a good or service.
Conceptually, demand is nothing but consumer’s readiness to satisfy desire by paying for goods
and services. A desire accompanied by ability and willingness to pay makes a real or effective
demand.

LAW OF DEMAND
The law of demand states that, conditional on all else being equal, as the price of good increases,
quantity demanded decreases; conversely, as the price of a good decreases, quantity demanded
increases. In the other words, the law of demand describes an inverse relationship between price
and quantity demanded of a good. Alternatively, other things being constant, quantity demanded
of a commodity. For example, a consumer, may demand 2 kilograms of apples at Rs 70 per kg;
he may, however, demand 1 kg if the price rises to Rs 80 per kg. This has been the general
human behaviour on relationship between the price of the commodity and the quantity
demanded. The factors held constant refers to other determinants of demand, such as the prices

1
O’Sullivan, Arthur; Sheffrin, Steven M. (2003).Economics: Principle in Action. Upper Saddle River, New Jersey:
Pearson Prentice Hall. p .79.
of the other goods and the consumer’s income. There are, however, some possible exceptions to
the law of demand, such as Giffen goods and Veblen goods.

DEMAND SCHEDULE
Demand schedule is a tabular statement showing various quantities of a commodity being
demanded at various levels of price, during a given period of time. It shows the relationship
between price of the commodity and its quantity demanded.
A demand schedule can be determined both for individual buyers and for the entire market. So,
demand schedule is of two types:
1) INDIVIDUAL DEMAND SCHEDULE
Individual demand schedule refers to a tabular statement showing various quantities of a
commodity that a consumer is willing to buy at various levels of price, during a given period of
time.

As seen in the schedule, quantity demanded of ‘x’ increases with decrease in its price. The
consumer is willing to buy 1 unit at Rs.5. when price falls to Rs. 4, demand rises to 2 units.
A ‘Demand Schedule’ states the relationship between two variables: price and quantity. It shows
that more is demanded at lower prices and quantity. It shows that more is demanded at lower
prices- just as you will probably buy more DVD’s when they are offered at a price less than the
normal price.
2) MARKET DEMAND SCHEDULE
Market demand schedule refers to a tabular statement showing various quantities of a community
that all the consumers are willing to buy at various levels of price, during a given period of time.
It is the sum of all individual demand schedules at each and every price.
Market demand schedule can be expressed as:
Where Dm is the market demand and DA+DB+…........................... are the individual demands
of Household A, Household B and so on.
Let us assume that A and B are two consumers for commodity x in the market. Table shows that
market demand schedule is obtained by horizontally summing the individual demands:
As seen in Table, market demand is obtained by adding demand of households A and B at
different prices. At Rs.5 per unit, market demand is 3 units. When the price falls to Rs. 4, market
demand rises to 5 units. So, market demand schedule also shows the inverse relationship between
price and quantity.
DETERMINANTS OF DEMAND
POPULATION
Acts as a crucial factor that affect the market demand of a product. If the number of consumers
increases in the markets, the consumption capacity of consumers would also increase. Therefore,
high growth of population would result in the increase in the demand for different products.
CLIMATE
Affect the demand of a product to a greater extent. For example, the demand of ice-creams and
cold drinks increases in summer, while tea and coffee are preferred in winter. Some products
have a stronger demand in hilly areas than in plains. Therefore, individuals demand different
products in different climatic conditions.
TASTE AND PREFERENCE
Its plays a major role in influencing the individual and market demand of product. The tastes and
preferences of consumers are affected due to various factors, such as life styles, customs,
common habits, and change in fashion, standard of living, religious values, age and sex.
A change in any of these factors leads to change in the tastes and preferences of consumers.
Consequently, consumers reduce the consumption of old products and add new products for their
consumption. For example, if there is change in fashion, consumers would prefer new and
advanced products over old-fashioned products, provided differences in prices are proportionate
to their income.
Apart from this demand is also influenced by the habits of consumers. For instance, most of the
South Indians are non- vegetarian; therefore, the demand for non- vegetarian products is higher
in Southern India. In addition, sex ratio has a relative impact on the demand for many products.
For instance, if females are large in number as compared to males in a particular area, then the
demand for feminine products, such as make-up kits and cosmetics, would be high in that area.
EFFICIENCY