Meanings and Definition of Demand:
The word 'demand' is so common and familiar with every one of us that it seems superfluous to define it. The need for precise definition arises simply because it is sometimes confused with other words such as desire, wish, want, etc.
Demand in economics means a desire to possess a good supported by willingness and ability to pay for it. If your have a desire to buy a certain commodity, say a car, but you do not have the adequate means to pay for it, it will simply be a wish, a desire or a want and not demand. Demand is an effective desire, i.e., a desire which is backed by willingness and ability to pay for a commodity in order to obtain it. In the words of Prof. Hibdon:
"Demand means the various quantities of goods that would be purchased per time period at different prices in a given market".
Characteristics of Demand:
There are thus three main characteristic's of demand in economics.
(i) Willingness and ability to pay. Demand is the amount of a commodity for which a consumer has the willingness and also the ability to buy.
(ii) Demand is always at a price. If we talk of demand without reference to price, it will be meaningless. The consumer must know both the price and the commodity. He will then be able to tell the quantity demanded by him.
(iii) Demand is always per unit of time. The time may be a day, a week, a month, or a year.
For instance, when the milk is selling at the rate of $15.0 per liter, the demand of a buyer for milk is 10 liters a day. If we do not mention the period of time, nobody can guess as to how much milk we consume? It is just possible we may be consuming ten liters of milk a week, a month or a year.
Summing up, we can say that by demand is meant the amount of the commodity that buyers are able and willing to purchase at any given price over some given period of time. Demand is also described as a schedule of how much a good people will purchase at any price during a specified period of time.
Law of Demand:
Definition and Explanation of the Law:
We have stated earlier that demand for a commodity is related to price per unit of time. It is the experience of every consumer that when the prices of the commodities fall, they are tempted to purchase more. Commodities and when the prices rise, the quantity demanded decreases. There is, thus, inverse relationship between the price of the product and the quantity demanded. The economists have named this inverse relationship between demand and price as the law of demand.
Statement of the Law:
Some well known statements of the law of demand are as under:
According to Prof. Samuelson:
"The law of demand states that people will buy more at lower prices and buy less at higher prices, other things remaining the same".
E. Miller writes:
"Other things remaining the same, the quantity demanded of a commodity will be smaller at higher market prices and larger at lower market prices".
"Other things remaining the same, the quantity demanded increases with every fall in the price and decreases with every rise in the price".
In simple we can say that when the price of a commodity rises, people buy less of that commodity and when the price falls, people buy more of it ceteris paribus (other things remaining the same). Or we can say that the quantity varies inversely with its price. There is no doubt that demand responds to price in the reverse direction but it has got no uniform relation between them. If the price of a commodity falls by 1%, it is not necessary that may also increase by 1%. The demand can increase by 1%, 2%, 10%, 15%, as the situation demands. The functional relationship between demanded and the price of the commodity can be expressed in simple mathematical language as under:
Formula For Law of Demand:
Qdx = f (Px, M, Po, T,..........)
Qdx = A quantity demanded of commodity x.
f = A...
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