What is demand ? || types of demand || law of demand along with its assumptions. :- StudySpot02

 What is demand, types of demand , law of demand ( with its assumptions).

What is demand?

Demand is the quantity of consumers who are willing and able to buy products at various prices during a given period of time. Demand for any commodity implies the consumers' desire to acquire the good, the willingness and ability to pay for it.

Types of Demand:-

1.Direct Demand: When a commodity demanded to satisfy qhuman wants directtly it is direct or conventional demand. For example, the for food, clothes have direct demand Consumer goods have direct demand.
2.Indirect demand: Indirect demand is also known as derived demand. When goods are demanded indirectly, i.e., to produce consumer goods, it is Indirect Demand. For example, the demand for factors of production is indirect demand.
3 .Joint Demand: When two or more goods are demanded jointly to satisfy a single need,it is known as joint demand for example, to make water, sugar, tea powder, milk etc. is jointly demanded. The demand for complementary goods is joint demand.
4.Composite Demand: The demand for commodities, which is used for satisfying several want at a time, is composite demand. For example, the demand for electricity is composite demand.
5. Competitive Demand: Competitive demand is when demand for a commodity competes with its substitutes. For example tea and coffee have competitive demand.

Law of demand 

The law of demand states that " other things being constant the higher the price of the commodity,  smaller is the quantity demanded and lower the price of the commodity larger is the quantity demanded " The law of demand has been explained by Alfred Marshall in his book ' Principles of economics '. 
The law of demand explains change in the behaviour of consumer demand due to various changes in price. Marshall's Law Of demand describes functional relation between demand and It can be expressed as D= f (P) that is demand price.function of price. The relation between price and demand is inverse, because larger quantity is demanded when price falls and smaller quantity will be demanded when price rises. The law of demand is explained with the help of the following schedule and diagram.
As shown in the schedule when price of mangoes is 50/- per kg. demand is I kg. When price falls to the level of 40/- per kg. and demand rises to 2 kg. Similarly, at the price Rs. 10/- per kg. demand of mangoes is 5 kg. , whereas 4 kg. of mangoes are demanded at price 20/-per kg. This shows inverse relation between price and demand.
In the diagram 1.1 X axis represents demand for mangoes, whereas Y axis represents price of mangoes. DD is demand curve which slopes downwards from left to right. In other words,  its slope is negative because of inverse relationship between price and demand. 



Why demand curve slopes downwards from left to right? 

The reasons for downward slopping demand curve are as follows:
1.The law of diminishing marginal utility: We have seen that marginal utility goes on diminishing with increasing stock of a commodity. Therefore, a consumer tends to buy more when price falls 
2.Income effect: When price falls, power of a consumer rises, which enables him to buy more of that commodity whose price falls. This is income effect.
3.Substitution effect: In case of substitute goods, when price of a commodity rises, its substitute 'become relatively cheaper. Therefore, a consumer will purchase more of that commodity.
4.Multipurpose uses: When a commodity can be used for satisfying several needs, its demand wi rise with a fall in is price and fall with a rise in its price

Assumptions of the Law of Demand

The law of demand is based on following assumptions.
1.Size and composition of population remains constant: There shouldn't be any  change in the size and composition of population. Because a change in population will bring about a changein demand even if price remains the same. 
2.Income of the consumer remains constant: Income of consumer should remain constant lf there is any change in income, demand tends to change even though price is constant or example, if income increases people will demand more quantity of a commodity even at a higher price. 
3.Tastes and habits remain constant: Taste, habit, custom, tradition and fashion etc. should remain unchanged due to changes in taste and preference, people's demand forgoods undergoes a change.
4.No change in expectations about future price changes :- There should not be any changes  in  the  expectations about the prices of goods in future. If consumers expect (that price will rise or fall in
future. they will change (their present demand though price is constant.
5. Prices or substitutes and complementary goods rernain constant: The prices of substitute and complejnentary goods shoUJd rernain constant. For instance, if price of tea rises, its demand will fall but demand for coffee will increase.
6.Government Policy remains constant: Taxation and fiscal policy of government s ould not change A change in income tax, for instance, may cause changes in consumer's. disposable income and hence demand.

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