Demand

14 April 2022
12:20 PM

Demand is the amount of goods and services which a

is willing and able to buy at certain price in the given period
time. For instance if a consumer is willing to buy 10 units of
commodity at $1 each in a week time, 10 units will be
considered as quantity demanded.

For an effective demand two conditions are met, first there is

desire to purchase and secondly, there is a power to
If one of the conditions is missing there is no
effective demand .Under the given circumstances price and
quantity demanded are inversely proportional to
each others. This relation can be explained with the help of
theory of demand. The theory says ‘ceteris paribus, as price
increases demand decreases and if price decreases demand
be increased’.

In the chart above, price is on the x-axis and quantity bought

on the y-axis. At P2, the higher price, people will only buy Q0,
the lower quantity. If the price drops to P1, then the quantity
bought will increase to Q1.

When the demand curve is relatively flat, then people will

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When the demand curve is relatively flat, then people will
lot more even if the price changes a little. When the demand
curve is fairly steep, then the quantity demanded doesn't
change much, even though the price does.

Changes in Demand

Demand changes due to price and non price factors. If

increases due to fall in price it is called extension in demand.
There is a movement along the curve downwards. On
the other hands if demand decreases due to increase in price,
is called contraction in demand. There is a movement along
curve upwards . if demand changes due to change in price, it
called as change in quantity demanded.

Due to non price factors there is a complete shift in demand

curve. If demand increases due to non price factors, there is a
complete rightwards shift in demand curve. It is also called
rise in demand. On the other hands if demand decreases due
non price factors, demand curve shifts leftwards. It is called
in demand. Due to rise or fall demand changes at each and
every price and it is called as change in demand.

Determinants of demand

1) The first important determinant of demand is price. Under

the given circumstances price and quantity demanded of
normal goods are inversely proportional to each others.
2) Second important determinant of demand is income. For
instance as income increases purchasing power will be
increased and consumer buy more of the goods.

3) Thirdly, prices of related goods also have affect on the

demand for a product.

4) Number of consumers is also an important determinant of

demand.

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5) Taste and fashion can also change demand.

6) Demand also is influenced by consumers’ expectation.

7) There is another factor which determined demand is
government policies.

8) Economic conditions , Advertising, Weather conditions

change demand.

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