Meaning of Demand

Demand is a quantity of a commodity which a consumer wishes to purchase at a given level of price and during a specified period of time.In other words, demand for a commodity refers to the desire to buy a commodity backed with sufficient purchasing power and the willingness to spend.

   Individual and Market Demand


 Determinants of Demand

1. The price of the good or service.
2. Income of buyers.
3. Prices of related goods or services. 4. consumers expectation.
5. Number of Buyers

1] Price of the Product
According to the law of demand, this implies an increase in demand follows a reduction in price and a decrease in demand follows an increase in the price of similar goods.

2] Income of the Consumers
Rising incomes lead to a rise in the number of goods demanded by consumers. Similarly, a drop in income is accompanied by reduced consumption levels. 

3] Prices of related goods or services
(a) Complementary products – An increase in the price of one product will cause a decrease in the quantity demanded of a complementary product.
Example: Rise in the price of car will reduce the demand for petrol. This arises because the products are complementary in nature.

(b) Substitute Product – An increase in the price of one product will cause an increase in the demand for a substitute product.
Example: Rise in price of tea will increase the demand for coffee and decrease the demand for tea.

4] Consumer Expectations
Expectations of a higher income or expecting an increase in prices of goods will lead to an increase the quantity demanded. Similarly, expectations of a reduced income or a lowering in prices of goods will decrease the quantity demanded.

5] Number of Buyers 
The number of buyers has a major effect on the total or net demand. As the number increases, the demand rises. Furthermore, this is true irrespective of changes in the price of commodities.