1. DEMAND CONCEPT OF DEMAND: Ordinarily by
demand is meant the desire or want for something.
In economics, however, demand means the
effective desire or want for a commodity backed up
by the ability and the willingness to pay for it. Thus
, want for a commodity without possessing money
to buy it or un willingness to pay a given price for it
will not constitute a demand for that commodity.
In short, Demand = Desire+ Ability to pay + Will to
spend. 1) Demand is always related to price and
time: Demand is a relative concept Demand for a
commodity should always have a reference to price
and time . Thus economists always mention the
amount of demand for a commodity with reference
to Price and specific time period, such as per day,
per week, per month or per year. 2) Demand may
be viewed ex-ante or ex-post: Ex-ante demand is
the intended demand and ex-post demand is what
is already purchased. The former denotes potential
demand, while the latter refers to the actual
magnitude purchased. 3) Demand may be direct or

2. derived: Consumer’s demand is a direct demand as
it directly yields satisfaction to the consumer.
Consumption goods have direct demand.
Producer’s demand for factor-inputs is a derived
demand as it is derived from the demand for the
final output. All capital goods have derived demand.
For example, the demand for a house for dwelling
purpose is a direct demand, while the demands for
bricks, cement, wood, architect, mason, carpenter,
etc. that are required to build the house are derived
demands. INDIVIDUAL DEMAND AND MARKET
DEMAND: Consumer demand for a product may
be viewed at two levels: 1] Individual demand 2]
Market Demand

3. Individual demand refers to the demand for a
commodity from the individual point of view. The
quantity of a good that a consumer would buy at a
given price during a given period of time is his
individual demand for that particular Good.
Individual demand is considered from one person’s
point of view or from that of a family or household’s
point of view. Market demand for a product on
the other hand, refers to the total demand of all the
buyers taken together. How much quantity the
consumers in general would buy at a given price
during a given period of time constitutes the total
market demand for the product. Market demand is
the sum total of individual demands. Aggregating all
individual buyers’ demand in the market derives it.
Market demand is more important from the sellers’
point of view. Sales depend on the market demand.
Business policy and planning are based on the
market demand. Prices are determined on the basis
of market demand and not of just an individual
demand for the product. In a competitive market,

4. interaction between total or market demand and
market supply determine the equilibrium price.
Usually under market mechanism, resources would
be automatically channelized in producing those
goods, which have a greater intensity of market
demand and consequently, higher prices and more
profitability. DETERMINANTS OF DEMAND Factors
influencing Individual Demand: An individual’s
demand for a commodity is generally determined
by such factors as: 1] Price of the Product:
Normally a larger quantity is demanded at a lower
price than at a higher price. 2] Income: With
increase in income one can buy more goods. Thus a
rich consumer usually demands more and amore
goods than a poor consumer. 3] Tastes and Habits:
Demand for several products like ice-cream,
chocolates, bhel-puri, etc depend on individual’s
tastes. Demand for tea, betel, tobacco, etc, is a
matter of habit. 4] Relative prices of other goods:
Relative products such as substitutes and
complementary goods also determine the demand

5. for a commodity. If substitutes are relatively
costly, then there will be more demand for this
commodity at a given price than in case of its
substitutes are relatively cheaper. When in order
to satisfy a given want, two or more goods are
needed in combination, these goods are referred to
as complementary goods. For e.g. car and petrol,
pen and ink, tea and sugar, shoes and socks, etc are
complementary to each other. When the price of
one commodity decreases, the demand for its
complementary product will tend to increase and
vice versa. 5] Consumers Expectations: When a
consumer expects its prices to fall in future, he will
tend to buy less at the present prevailing price.
Similarly, if he expects its price to rise in future, he
will tend to buy more at present. 6]
Advertisement Effect: In modern times, the
preferences of a consumer can be altered by
advertisement and sales propaganda although to a
certain extent only. Factors influencing Market
Demand: Market demand is the general demand

6. pattern of the community of the people at large.
The following factors affect the common demand
pattern for a commodity in the market. 1) Price of
the product: At a low market price, market demand
for the product tends to be high and vice versa. 2)
Distribution of income and wealth in the
community: If there is equal distribution of income
and wealth, the market demand for many products
of common consumption tends to be greater than
in the case of unequal distribution. 3) Community’s
Common Habits and Scale of Preferences: For e.g.
When a large section of population shifts its
preference fromvegetarian foods to non-vegetarian
foods, the demand for the former will tend to
decrease and that for the latter will increase. 4)
General standards of Living and Spending Habits of
the People: When people in general adopt a high
standard of living and are ready to spend more,
demand for many comforts and luxury items will
tend to be higher than otherwise. 5) Number of
Buyers in the Market and the Growth of Population:

7. The size of market demand for a product obviously
depends on the number of buyers in the market. A
large number of buyers will constitute a large
demand and vice versa. 6) Age structure and sex-
ratio of the Population: If there is large number of
juvenile population then the market demand for
toys, schools, etc i.e. goods and services required by
children will be much higher than the market
demand for goods needed by the elderly people.
Similarly females exceeding males in number would
mean a greater demand for goods required by the
female population than the male population. 7)
Future Expectations: If buyers in general expect that
prices of a commodity will rise in future, present
market demand would be more as most of them
would like to hoard the commodity. The reverse
happens if a fall in the future prices is expected. 8)
Level of Taxation and Tax Structure: A progressively
high tax rate would generally mean a low demand
for goods in general and vice versa. But a highly
taxed commodity will have a relatively lower

8. demand than an untaxed commodity- if that
happens to be a remote substitute. 9) Inventions
and Innovations: Introduction of new goods or
substitutes as a result of inventions and innovations
in a dynamic modern economy tends to adversely
affect the demand for the existing products, which
as a result of innovations, definitely become
obsolete. 10)Fashions: For example
e; demand for commodities like jeans, are based
on current fashions. 11)Climate or weather
conditions: For example: in summer, there is a
greater demand for cold drinks, fans, coolers etc.
Similarly, demand for umbrellas and raincoats are
seasonal. 12) Customs: Fro example during
Christmas there is more demand for gifts and cakes.
13) Advertisement and Sales Propaganda: Market
demand for many products in the present day is
influenced by the sellers’ efforts through
advertisements and sales propaganda Demand is
manipulated through selling efforts. 14) War

9. Period: As compared to the normal period, during
war time, market demand for most goods tends to
contract. This is because people become more
patriotic and are willing to sacrifice more to permit
diversion of resources from civilian use to the
military sector for strengthening the defence
programmes. The government may also borrow
on a large scale to meet war expenditure. As a
result, the purchasing power of the public
decreases. Again, prices may also tend to
rise on account of the increased war expenditure by
the government. War-time inflation thus implies
curtailment of overall demand for goods in general.