The quantity of products and services customers are willing and able to acquire in a certain market at a specific time and price is referred to as demand. It depicts the link between a product’s or service’s cost and the quantity consumers are willing to buy, provided all other variables stay constant. Price, customer preferences, income levels, and external forces all impact demand, which is important in economics and commercial decision-making.
According to Prof. Marshall, “Demand refers to the quantities of a commodity that the consumers are able and willing to buy at each possible price during a given period of time, other things being equal.“
- 5 Types Of Demand
- Frequently Asked Questions (FAQs) about Types Of Demand
5 Types Of Demand
Demand may be broadly classified into different types of Demand:
The demand for ultimate object is called direct demand. In other words, direct demand refers to demand for a commodity that is directly consumed to satisfy human wants. For example, demand for bread, butter, fruits, etc. Direct demand for a commodity can be further classified into price demand, income demand and cross demand.
a. Price demand
Price demand refers to the various quantities of a commodity or services that a consumer would purchase at a given time period in a market at various prices. It expresses the relationship between price and quantity demanded. There would be higher demand at a lower price and lower demand at a higher price, other things remaining the same. Consumer’s income, his tastes and preferences, price of related goods, etc. are the other things.
Income demand expresses the relationship between income and demand for a commodity. It refers to the various quantities of goods and services, which would be purchased by a consumer at various level of income in a given period of time other things being equal. Other things are the prices of the related goods, taste and preferences, price of the same good, etc. The demand for normal goods increases with the rise in come and vice versa. But In case of inferior goods,there is inverse relationship between income and Demand .In such Case as Income increase demand decreasing and vice-versa.
Cross demand expresses the relationship between the demand for one good, say X, and the price of the related good, say Y. It refers to the various quantities of a good, which will be purchased with reference to the change in the price of other related goods. There are two types of related goods: substitute and complementary.
i.Substitute goods: Those goods are substitute goods, which are used in place of each other, for example, tea and coffee. If the price of tea increases, the demand for coffee will rise and vice-versa, the price of coffee remaining the same.
ii. Complementary goods: Those goods are complementary goods, which are jointly used to satisfy a want, for example, pen and ink. In such case, the rise in price of pen will bring a fall in the demand for ink. Conversely, a fall in the price of pen will increase the demand for ink.
2. Indirect Demand or Derived Demand
The demand for factors of production, which go to make final product is called indirect or derived demand because they help in the production of a commodity, which is directly demanded by the consumer in the market. For example, demand for brick, cement, iron, wood, labor, etc. to construct a building is derived demand.
3. Joint Demand
When several things are demanded for a joint purpose, it is a case of joint demand. In other words, the demand for complementary goods is joint demand because complementary goods are demanded jointly to satisfy a want. For example, demand for car and petrol, pen and ink, etc.
4. Composite Demand
When a good is demanded for several uses, it is called composite demand. For example, demand for electricity is composite demand because it has several uses like heating, cooking lighting, etc.
5. Competitive Demand
Goods that are close substitute with each other are said to be in competitive demand. Other things being equal, the demand for a good will change when price of its substitute changes. For example, demand for NTC mobile and NCell mobile is competitive demand.
Frequently Asked Questions (FAQs) about Types Of Demand
1. What are the different types of demand?
There are several types of demand, including individual demand, market demand, joint demand, composite demand, and derived demand.
2. What is individual demand?
Individual demand refers to the quantity of a good or service that a single consumer is willing and able to purchase at different price points.
3. What is market demand?
Market demand represents the total quantity of a product or service that all consumers in a specific market are willing to buy at a particular price and time.
4.. How can changes in consumer income affect demand?
Joint demand occurs when two or more goods are demanded together because they are complementary or used together. For example, cars and gasoline.