Demand is the economic principle that refers to a consumer's desire to purchase goods and services and its willingness to pay a price for a specific good or service. Other factors being constant, with an increase in the price of a good or service it will decrease the quantity demanded and vice versa. Market demand, whereas, is the total quantity that is demanded across all the consumers in a market for a particular good. This aggregate demand is defined as the total demand for all the goods and services that are present in an economy. Multiple stocking strategies are used to handle this demand.
The Law of Demand states, that when the price of a commodity falls, the demand increases and also when the price of the commodity rises, the demand decreases; while other things remaining constant. So, there exists an inverse relationship between the price and quantity that is demanded of this commodity. The functional relationship between the price and the quantity demanded can be represented as:
Dx = f(Px).
Now we should know what a Demand Schedule is.
This is a statement in a tabular form that shows different quantities which are being demanded at different prices. There are two types of Demand Schedules:
Individual Demand Schedule
Market Demand Schedule
In economics, a demanding schedule is a table that shows the quantity that is demanded of a good or service at different price levels. A demand schedule can also be graphed as a continuous demand curve on a chart where the Y-axis represents the price and the X-axis represents the quantity.
A demand schedule is typically used together with a supply schedule, that shows the quantity of a good which would be supplied to the market by the producers at given price levels. By drafting these graphs, both the schedules on a chart with the axes described above, it is possible to obtain a graphical representation of the supply and the demand dynamics of a particular market.
Also, in a typical supply and demand relationship, as the price of a good or the service rises, the quantity demanded drops and falls. When all these factors are equal, the market reaches its equilibrium, there the supply and demand schedules intersect with one another. At this point, the corresponding price is the equilibrium market price, and the corresponding quantity is the equilibrium quantity that is exchanged in the market.
Price not being the sole factor determines the demand for a particular product. The demand may also be affected by the amount of disposable income available, shifts in the quality of the goods in question, effective advertising, and other weather shifts.
Price changes in the related goods or services may also affect the demand. Here the price of one product rises, and the demand for a substitute may rise, also a fall in the price of a product may increase the demand for the complementary goods. For example, a rise in the price of one brand of the coffeemaker will increase the demand for a relatively cheaper coffee maker that is produced by a competitor. If the price of all coffee makers falls, the demand for coffee, which is a complement to the coffeemaker market, may rise as consumers may want to take advantage of the price declining in the coffeemakers.
This is a demanding schedule that illustrates the demand of an individual customer for a commodity in relation to the price.
Let us study, by referring to an example.
The above schedule represents the individual demand schedule. Here when the price of the commodity is ₹100, its related demand is 50 units. Also, when the price is ₹500, then its demand decreases to 10 units.
So, we can conclude that as the price falls the demand increases and as the price rises the demand decreases (Vice Versa). Thus, we see there is an inverse relationship between the price and the quantity demanded.
Below is a graphical representation of the individual demand schedule, where the X-axis represents the demand and the Y-axis represents the price of the commodity.
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The above demand curve shows the demand for the fuel that is Gasoline. The price of gasoline is $3.5 per litre, the demand is 50 litres and as the price is $0.5 per litre, the demand is 250 litres.
Q1. What is the meaning of Quantity Demanded?
Ans. The quantity demanded means the number of goods that a buyer is willing to buy at a given price. This increase or decrease in the buyer's requirement changes the amount of quantity demanded.
Quantity demanded is a term that is used in economics to describe the total amount of a good or service which the consumers demand over a given period of time. This depends on the price of a good or the service in a marketplace, that is regardless of whether that market is in equilibrium or no.
The relationship which has caused between the quantity demanded and the price is known as the demand curve, or simply the demand. The degree to which the quantity demanded changes with respect to the price is known as the elasticity of the demand.
Q2. Define Price.
Ans. Price is the amount of money that is required to be paid to acquire a given product. This is the amount which people are prepared to pay for a product that represents their own value, price can also be termed as the measure of value.
Pricing is a process of fixing the value which a manufacturer will receive in the exchange of services and goods. Fixing the cost of a product and services, this following point is required to be considered, which is the identity of the goods and services - the cost of similar goods and services that is situated in the market.
Q3. Explain Individual Demand.
Ans. Individual demand is the demand for a good or a service that is by an individual also known as a household. Individual demand comes from the interaction of an individual's desires for the quantities of goods and the services that he or she is able to afford the same.