Theory of Demand|What is meaning of demand ?|What are the types of demand schedule ?|What is meaning by demand curve ?|How many types of demand function ?

Theory of Demand|What is meaning  of demand ?|What are the types of demand schedule ?|What is meaning by demand curve ?|How many types of demand function ? 

         What is meaning  by demand ?

Demand refers to the different possible quantities of a command that a consumer is ready to buy at different possible  prices of that commodity.

    What is meaning by demand schedule ?

A demand schedule is a table that shows the different quantities of a commodity purchased quantities of a commodity purchased at different prices.

  What are the types of demand schedule ?

i) Individual Demand Schedule 

ii) Market Demand Schedule 

                  Individual Demand Schedule 

Individual Demand Schedule  means the demand schedule of an individual consumer in the market.

                      Market Demand Schedule 

It is a table which shows the different quantities of a commodity that all the buyers in the  markets are ready to buy at a given point of time at different possible prices of the commodity.

    What is meaning by demand curve ?

A demand curve is a graphical representation of a demand schedule that shows the relationship between the different possible prices of a commodity and the quantity demanded.

How many types of demand curve ?

i) Individual demand curve 

ii) Market demand curve 

 

           Individual demand curve 

Individual demand curve is a curve that shows the different quantities of a commodity that a particular buyer is willing to buy at a given point of time at different possible prices of the commodity.

         Market demand curve 

Market demand curve is a curve that shows the different quantities of a commodity that all the buyers in the market are ready to buy at a given point of time at different possible prices of the commodity.

Demand function or Determinants of Demand 

The demand function reveals the relationship between the demand for a commodity and its various determinations.It shows that the demand for a commodity depends that the demand for a commodity depends on its own or consumer's income or other determining factors.

How many types of demand function ?

i) Individual demand function

ii) Market demand function 

          Individual demand function

Individual demand function shows how the demand made by an individual consumer in the market is related to its various determinants,This rule is expressed by writing:

i) Own prices of the commodity: Other things remaining the same,the demand for the commodity decreases when its own prices decreases,inverse relationship between a commodity's own price and its demand is called the law of demand.

ii) Price of Related Goods:The demand for a commodity is greatly by the change in the prices of related goods.

There are two types of related objects:

i) Substitute Goods:Substitute goods are those goods which can be used in place of each other.

ii) Complementary Goods:Complementary Goods are those goods which together satisfy each other's demand and hence are demanded together.

ii) Income of the consumer:Change in the income of the consumer also affect the demand for various goods.with the increase in the consumer's income,the demand for normal goods increases and on the contrary,with the increase in the consumer's income,the demand for inferior goods decreases.

iv) Taste and Preference:The demand for goods and services also depends on the taste and preference of the individual.Other things remaining the same,the demand for the goods for which consumers are interested interest for a commodity,its demand decreases.

               Market demand function 

It reveals the relationship between the market demand for a commodity and its various determinants.

i) Size of Population of Income: Increase in population increase demand and decrease in population decreases demand.

ii) Distribution of income: Market demand is also affected by the distribution of income in the society.if the distribution of income is equal then the demand will be more.if the distribution of income is flat,demand will be low.

                  Law of Demand  

The law of demand states that other things being equal,the quantity demanded of a commodity increases when its price decreases and vice versa.

         Assumptions of law of demand 

i) The tastes and preferences of the consumers remain constant.

ii) There is no change in the income of the buyers.

iii) There is no change in the prices of related goods.

          Exceptions to the Law of Demand 

i) Geffen Goods:Like rice,pulses,oil

ii) Social Common Goods: Like gold,silver

 Why is the slope of the demand curve negative ?

The negative slope of the demand curve indicates that more goods are bought when the price is low.Therefore,there is an inverse relationship between the prices of a commodity and the quantity supplied of it.

The following are the reasons for the demand curve being negatively sloped:

i) Law of diminishing marginal utility

ii) Substitution Effect

iii) Size of Consumer Group

    Law of diminishing marginal utility

According to this rule,as the consumption of a commodity increase,the marginal utility derived from each subsequent unit decreases.

           Substitution Effect

The substitution effect means that when one goods become cheaper than its substitute,the other goods is substituted.

        Size of Consumer Group

When the price of an item decreases,then many more buyers who were not buying that item earlier will now be interested in buying it.This will increase the demand for the commodity.