The term demand is used in a different sense in economics in the normal course of action the desire or wants to purchase a commodity is termed as a demand, for example, Mr. X wants to buy an Audi but he lacks sufficient money to buy it. It will be qualified as demand in the general sense.
But, in economics, it is when he wants to buy an Audi and has sufficient purchasing power to buy that Audi only then it will be termed as Demand.
- The demand must have the following characteristics:
- – It is always with references to some price.
- – It should have sufficient purchasing power to buy the commodity.
- – It would have the desire to purchase the commodity.
- – It is a flow concept as it is always related to a given period of time.
- – Demand is defined as the quantity of a commodity that a consumer is willing and able to purchase at a particular price at a given period of time.
- – In economics, there is a distinction between demand and quantity demanded.
Quantity demanded: It is a specific quantity that a buyer is willing and able to purchase at a particular price whereas demand is defined as the various quantities that a buyer buys at different prices.
– Quantity demand is the intended purchased of the consumer, not the actual purchase.
– It is the flow concept.
– How much quantity of a commodity a consumer will buy depends upon the price of that commodity, for instance, Mr. X went to the market to buy a leather jacket by assuming the price to be $ 500, to his egregious he found that due to Christmas discount the seller is offering 2 jackets @ $ 1200. So, in this case, the quantity which he wanted to buy increased from 1 to 2 due to decreased price. Therefore, “QUANTITY DEMANDED” depends on the price.
Whereas the “DEMAND” for any product say leather jacket depends on other factors such as the consumer’s income, Mr. X will plan to buy a Leather jacket only when he knows that he has sufficient purchasing power as leather jackets are costly. Similarly, his decision to purchase a leather jacket also depends on the other factors such as season if it’s cold only, he desires to buy the same. We will discuss other factors in more detail further in this chapter.
TYPES OF DEMAND:
Individual demand: It refers to the quantity of a commodity that an individual consumer is willing and able to buy at given prices. In other words the number of units of a particular commodity purchased by an individual consumer from a particular market.
Market Demand: It refers to the horizontal summation of the individual demand. In other words, when the demand of different consumers is added for a particular commodity in a specific market it becomes the market demand.
Symbolically, DM = Da+ Db + Dc………….Dn.