m1resse
dcrnaJl
'/ ; time. We must ahv.a
d per un / 0~
d as 50 much per period
Ys
of
l
express 200 cars per day, or 1400 cars
l),,ltf,lr,,/ /Or· 1 ·
of " ' ro 1111 110,fity n'fa s to tire q11atrtlt1es tirne, e.g., 000 cars per year. Thu
11 f1'f 1
II I f)lfr,,r) ek or 73, . I s,
,r,r 11 11 1 wl1icl1 co11s11111ers are wilf/,rg per we , not refer to a smg e isolated
11
1
,Ir • <' to l 111 rrlrnse flt various possible prices demand d::t to a continuous flow of
11 · In,· period of time~
"'"~ ' I'"' t ,cu purchase,
I h0 t0 11 · ) purchases. .
ti , J .• mvmg remarks need to be noted in
11s l1~hnition of demand : t demand for a car IS 200, it
if we say th a d
Thus, t ment. The term emanct is
1. In common language, the terms 'demand' . plete sta e
and 'd · , is an rncom 'thout reference to the Price
eS1re are used to convey the same · gless WI
mea nin g. But in economics, demand totally mean.in . e period. Demand makes a
for a commodity is not the same thing and th e r
elevant
n1 when we re fer It· to sorne
tun
complete sense o y . d
as _de_sire for it. Desire is just a wishful ti e peno •
thinking. It refers to the idea of having price and the m
something. Demand refers to both the
desire to purchase and the ability to pay 2.2.1 Types of Demand
for a commodity. It is only when desire is
backed by the willingness and power to various goods can be classified
The deman d for
pay that gives rise to demand. In other . f the number of consumers of a
on the basis o
words, demand is an effective desire, i.e., of the goods, interdependence of
product, na ture
a desire accompanied by the willingness f the use of the product, e.tc. We
demand, na ture O
to purchase and power to purchase. have discussed here five major types of demand,
Thus, a desire to buy a good backed by namely individual and market demand, ex ante
willingness to pay and ability to pay and ex post demand, joint demand, derived
becomes effective demand. For instance, I
demand and composite demand.
may have the desire for a car, but it will
become demand only when I have the G1. r 19<fividual Demand and Market Demand:
adequate amount of money to purchase We may c:onsider the demand for a
the car and I am willing to spend that commodity from the individual's point
money to purchase that car. of view or from the market's point of
2. Demand in economics is always at a price. view. Individual demand refers to the
It makes no sense if it is not related to a demand for a commodity by a single
price. For example, we may be willing consumer. Thush ndividual demand refers
to purchase a shirt if it is available for to.Jhe quantities-of a commodity that
,soo, but we may not buy it at all if an.J.!!.dividual consumer is willing to
the shirt is priced at ,soo. Moreover, pl{rchase at various prices during a given
different quantities of a commodity will
pB(iod of time, Aft inaividual consumer
be demanded at different prices. Therefore,
is called a household in economics.
demand is always expressed in relation to a
Therefore, individual demand is the same
particular price. For a given price, demand
thing as household demand. For instance,
tells us a specific quantity that consumers
the quantity of milk purchased per day
are willing to purchase at that price.
3. Thirdly, demand is always expressed with by your mother is individual demand
for milk.
reference to a particular time period. For
example, demand for a car will be quite The sum total of demand by all the
different if the period in question is one households or individuals is ~nown
day, one week, or one year. Demand is a as th e market demand. Thus, tnarket
flow concept. Flow is any variable which is demand refers to the tot"1_q.uantirr;;7;J
a commodity that all the households ar3/
• FRANK ISC ECONOMICS-XII
, iJliiJg to buy nl vn~io11s ~ric~s rl11rl11g called derived demand . For instan ce,
tV ·ve,, period of I 1111e) l·or 111s lonce, ctcm,rnc.l for st••cl, bricki;, ccmPnt, 5tont·s,
"~:, quontily of milk which all the wood, etc. is a derived dcm,ind dcnved
tot, . arc willing to buy at a given from the demand for houcws and other
b ,ycr 5 buildings. The demand for thes,, goodc;
l. per day (or over any other period
rice arises because of the demand for houS<..'S
P •me - week or month) is the market
of t1
d for milk. and other buildings.
de01 an Derived demand generally relates to
Ex ante and Ex z ost Demand: ~ ante
vJ' detn;nd refers to the amount of goods the demand for factors of production.
Demand for factors of production such
hat consumers want to or willing to buy
~uring a particular time period. It is the as labour, is derived from the demand for
planned or desired amount of demand. the goods produced with these factors of
Ex post demand, on the other hand, production. For instance, the d~mand for
refers to the amount of the goods that labour in a textile mill is derived from
the consumers actually purchase during the demand for the cloth produced by the
a specific period. It is the amount of the labour.
oods actually bought. The amount of ~ Composite Demand: D!mand for goo~s
~he goods actually bought is not the same that have multiple uses ts called compoSite
as the amount that the consumers want demand. For example, the dema nd for
(desire) to purchase. If the commodity steel arises from various uses of st eel
is not available in adequate quantity, such as use of steel in making utensils,
the quantity actually purchased (ex post bus bodies, room coolers, cars and so
demand) will be less than the quantity that on. Thus, a commodity is said to have
the consumers desire to purchase (ex ante composite demand when it can be put
demand). Thus, consumers may end up to several alternative uses. In the case of
buying more or lesser quantity of goods composite demand, a change in the price
that they had planned to buy. of such a product would lead to a large
3. Joint Demand: Joint demand refers to change in its demand because its demand
the demand for two or more goods which for all the uses would change. Moreover,
a;;- used jointly or demanded together. an increase in the demand for the product
For example, cars and petrol, butter and in one use decreases its availability for
bread, milk and sugar, etc. are the goods another use. For example, an increased
which are used together. The demand for demand for electricity for domestic use
the goods having joint demand changes would reduce the availability of electricity
simultaneously. For instance, an increase in ~
for commercial use.
the demand for cars leads to a simultaneous
increase in the demand for petrol as well. ~
2.3 DETERMINANTS OF DEMAND/
In case of joint demand, a rise in the price
FACTORS AFFECTING DEMAND
of one good leads to a fall in the demand
for the other good and vice versa. For The factors that influence the decision of
example, a rise in the price of cars will lead households to purchase a commodity are known
to not only a fall in the demand for cars as the determinants of demand. We can look at
but also a fall in the demand for petrol. the determinants of individual demand as well
JJ· Derived Demand: The demand for a as the market demand.
commodity that arises because of the
While purchasing a shirt, you might have
~emand for some other commodity is
been influenced by a number of considerations-
• DEMAND ANO LAW OF DEMAND 9
, the
«111ottnt
.....
(.) Norm a
l goods (NG): Norn-rat
d
l
go
' - th Ose goods the emand for %
Shirt 1• •• of l11nnL'Y you w,rnl lo spend on
' 2ttc~ of 1
°
.l
are • .
.. ses with increase in i 1c~
'lvh •
fushio 1 l )l' shirt, your liking for the shir, increa 1tc0
\ etc n · 1• d the consumers, and decre "1,
for · \is " the C\lsc with everyone. Deman of • • S Qse
uny P1rt · d
by 1 ' · icu\ar co mmodity is influence wt'th ,'all
' in income. . h. o, the re •a
u ilrgc v . f itive re 1at10ns 1p bet is
the ancty of factors, namely price o a pos wee
con,moct.1t . .. ..,.,er's income and the qu ~
cons Y, pnces of other commodities, consu11• . anijh.
umers' · n ded There 1s a whole r ·,
adve t· Income, the taste of the consumers, de.ma · anl)
r ise:ment d . roducts which we PUtch ci~
abo t ' emonstration effect, expectation of P .. ase
u futur · . • . 1 ger quantities as our inc
wealth . e. pn~es, size of the populat10n, in ar Otrie
po}' ' di st ribution of income, government .
nses.
For instance, a consurner ~
••~t
i:m icy, etc. We discuss below some of the . se his demand
. . for cloth es
10 crea
portant determinants of demand for a . rators telev1s10n sets anct c ·
commodity: re fr1ge ' . ars
as 1sh . m· come mcreases. As a tnak
lter
l. ~rice of the Commodity: T~ost of fact, all articles of ~omforts ilnd
p't'- _D ~ u~ortant determinant of the demand luxuries i.e. goods which make our
for a commodity is the own price of the 1:c more comfortable and enjoyabJ
~
{1 ~1' commodity. Normally, there is an inverse
we
belong to this category of norrnai
~
relationship between the price of the goods. As our income increases,
commodity and its quantity demanded. we can afford to purchase a larger
It imp1ies that lower the price of the
quantity of these goods.
commodity, the larger is the quantity
demanded; and the higher the price, (ii) Inferior goods (JG): Inferior goods are
the lesser is the quantity purchased. those goods the demand for which
You must have observed your mother falls with increase in income of the
purchasing more quantity of apples as the consumer and increases with fall
price of apples falls. ~..type o{...d.emand in income. So, there is an inverse
is... known as price demana. Th1i-c:-nrice
~ .- . . , r relationship between income of the
demand refers to different quantities-of consumer and the demand for inferior
a commodity which -are-;:mrchased at goods. For example, the demand for
different prices. We shall explain this in coarse cereals like maize or jowar
detail under the Law of Demand. may decrease when income increases
2. Income of the Consumer: Income of beyond a particular level because
the consumer is the basic determinant the consumers may substitute it by
of the quantity demanded of a product a superior cereals like wheat or rice.
as it determines the eurchasing1 .eo~ Coarse cereals, coarse cloth and black
'l ,t. ~ of the consumer. Generahy, there is a
1' and white television are examples
D\
direct relationship between the income of inferior goods. Consumers will
Y ~ \/of the consumer and. his demand for a purchase more of these goods at
product, i.e., with an increase in income, lower level of income. At low levels
the demand for the commodity increases. 0
_.!_ income, increase in income of
However, this may not always be the case.
~he consumers is accompanied by
While discussing the relationship increase in the demand ,for these
between income of the consumer and commodities. However once a
the demand for a commodity, we may certain level of income is 'achieved,
distinguish between three types of goods: fur th er increases in income are
(i) normal goods, (ii) inferior goods, accompanied by a fall in the
(iii) inexpensive necessities of lite.
demand for these commodities like
11
FRANK ISC ECONOMICS-Xii
dcrnaJl
'/ ; time. We must ahv.a
d per un / 0~
d as 50 much per period
Ys
of
l
express 200 cars per day, or 1400 cars
l),,ltf,lr,,/ /Or· 1 ·
of " ' ro 1111 110,fity n'fa s to tire q11atrtlt1es tirne, e.g., 000 cars per year. Thu
11 f1'f 1
II I f)lfr,,r) ek or 73, . I s,
,r,r 11 11 1 wl1icl1 co11s11111ers are wilf/,rg per we , not refer to a smg e isolated
11
1
,Ir • <' to l 111 rrlrnse flt various possible prices demand d::t to a continuous flow of
11 · In,· period of time~
"'"~ ' I'"' t ,cu purchase,
I h0 t0 11 · ) purchases. .
ti , J .• mvmg remarks need to be noted in
11s l1~hnition of demand : t demand for a car IS 200, it
if we say th a d
Thus, t ment. The term emanct is
1. In common language, the terms 'demand' . plete sta e
and 'd · , is an rncom 'thout reference to the Price
eS1re are used to convey the same · gless WI
mea nin g. But in economics, demand totally mean.in . e period. Demand makes a
for a commodity is not the same thing and th e r
elevant
n1 when we re fer It· to sorne
tun
complete sense o y . d
as _de_sire for it. Desire is just a wishful ti e peno •
thinking. It refers to the idea of having price and the m
something. Demand refers to both the
desire to purchase and the ability to pay 2.2.1 Types of Demand
for a commodity. It is only when desire is
backed by the willingness and power to various goods can be classified
The deman d for
pay that gives rise to demand. In other . f the number of consumers of a
on the basis o
words, demand is an effective desire, i.e., of the goods, interdependence of
product, na ture
a desire accompanied by the willingness f the use of the product, e.tc. We
demand, na ture O
to purchase and power to purchase. have discussed here five major types of demand,
Thus, a desire to buy a good backed by namely individual and market demand, ex ante
willingness to pay and ability to pay and ex post demand, joint demand, derived
becomes effective demand. For instance, I
demand and composite demand.
may have the desire for a car, but it will
become demand only when I have the G1. r 19<fividual Demand and Market Demand:
adequate amount of money to purchase We may c:onsider the demand for a
the car and I am willing to spend that commodity from the individual's point
money to purchase that car. of view or from the market's point of
2. Demand in economics is always at a price. view. Individual demand refers to the
It makes no sense if it is not related to a demand for a commodity by a single
price. For example, we may be willing consumer. Thush ndividual demand refers
to purchase a shirt if it is available for to.Jhe quantities-of a commodity that
,soo, but we may not buy it at all if an.J.!!.dividual consumer is willing to
the shirt is priced at ,soo. Moreover, pl{rchase at various prices during a given
different quantities of a commodity will
pB(iod of time, Aft inaividual consumer
be demanded at different prices. Therefore,
is called a household in economics.
demand is always expressed in relation to a
Therefore, individual demand is the same
particular price. For a given price, demand
thing as household demand. For instance,
tells us a specific quantity that consumers
the quantity of milk purchased per day
are willing to purchase at that price.
3. Thirdly, demand is always expressed with by your mother is individual demand
for milk.
reference to a particular time period. For
example, demand for a car will be quite The sum total of demand by all the
different if the period in question is one households or individuals is ~nown
day, one week, or one year. Demand is a as th e market demand. Thus, tnarket
flow concept. Flow is any variable which is demand refers to the tot"1_q.uantirr;;7;J
a commodity that all the households ar3/
• FRANK ISC ECONOMICS-XII
, iJliiJg to buy nl vn~io11s ~ric~s rl11rl11g called derived demand . For instan ce,
tV ·ve,, period of I 1111e) l·or 111s lonce, ctcm,rnc.l for st••cl, bricki;, ccmPnt, 5tont·s,
"~:, quontily of milk which all the wood, etc. is a derived dcm,ind dcnved
tot, . arc willing to buy at a given from the demand for houcws and other
b ,ycr 5 buildings. The demand for thes,, goodc;
l. per day (or over any other period
rice arises because of the demand for houS<..'S
P •me - week or month) is the market
of t1
d for milk. and other buildings.
de01 an Derived demand generally relates to
Ex ante and Ex z ost Demand: ~ ante
vJ' detn;nd refers to the amount of goods the demand for factors of production.
Demand for factors of production such
hat consumers want to or willing to buy
~uring a particular time period. It is the as labour, is derived from the demand for
planned or desired amount of demand. the goods produced with these factors of
Ex post demand, on the other hand, production. For instance, the d~mand for
refers to the amount of the goods that labour in a textile mill is derived from
the consumers actually purchase during the demand for the cloth produced by the
a specific period. It is the amount of the labour.
oods actually bought. The amount of ~ Composite Demand: D!mand for goo~s
~he goods actually bought is not the same that have multiple uses ts called compoSite
as the amount that the consumers want demand. For example, the dema nd for
(desire) to purchase. If the commodity steel arises from various uses of st eel
is not available in adequate quantity, such as use of steel in making utensils,
the quantity actually purchased (ex post bus bodies, room coolers, cars and so
demand) will be less than the quantity that on. Thus, a commodity is said to have
the consumers desire to purchase (ex ante composite demand when it can be put
demand). Thus, consumers may end up to several alternative uses. In the case of
buying more or lesser quantity of goods composite demand, a change in the price
that they had planned to buy. of such a product would lead to a large
3. Joint Demand: Joint demand refers to change in its demand because its demand
the demand for two or more goods which for all the uses would change. Moreover,
a;;- used jointly or demanded together. an increase in the demand for the product
For example, cars and petrol, butter and in one use decreases its availability for
bread, milk and sugar, etc. are the goods another use. For example, an increased
which are used together. The demand for demand for electricity for domestic use
the goods having joint demand changes would reduce the availability of electricity
simultaneously. For instance, an increase in ~
for commercial use.
the demand for cars leads to a simultaneous
increase in the demand for petrol as well. ~
2.3 DETERMINANTS OF DEMAND/
In case of joint demand, a rise in the price
FACTORS AFFECTING DEMAND
of one good leads to a fall in the demand
for the other good and vice versa. For The factors that influence the decision of
example, a rise in the price of cars will lead households to purchase a commodity are known
to not only a fall in the demand for cars as the determinants of demand. We can look at
but also a fall in the demand for petrol. the determinants of individual demand as well
JJ· Derived Demand: The demand for a as the market demand.
commodity that arises because of the
While purchasing a shirt, you might have
~emand for some other commodity is
been influenced by a number of considerations-
• DEMAND ANO LAW OF DEMAND 9
, the
«111ottnt
.....
(.) Norm a
l goods (NG): Norn-rat
d
l
go
' - th Ose goods the emand for %
Shirt 1• •• of l11nnL'Y you w,rnl lo spend on
' 2ttc~ of 1
°
.l
are • .
.. ses with increase in i 1c~
'lvh •
fushio 1 l )l' shirt, your liking for the shir, increa 1tc0
\ etc n · 1• d the consumers, and decre "1,
for · \is " the C\lsc with everyone. Deman of • • S Qse
uny P1rt · d
by 1 ' · icu\ar co mmodity is influence wt'th ,'all
' in income. . h. o, the re •a
u ilrgc v . f itive re 1at10ns 1p bet is
the ancty of factors, namely price o a pos wee
con,moct.1t . .. ..,.,er's income and the qu ~
cons Y, pnces of other commodities, consu11• . anijh.
umers' · n ded There 1s a whole r ·,
adve t· Income, the taste of the consumers, de.ma · anl)
r ise:ment d . roducts which we PUtch ci~
abo t ' emonstration effect, expectation of P .. ase
u futur · . • . 1 ger quantities as our inc
wealth . e. pn~es, size of the populat10n, in ar Otrie
po}' ' di st ribution of income, government .
nses.
For instance, a consurner ~
••~t
i:m icy, etc. We discuss below some of the . se his demand
. . for cloth es
10 crea
portant determinants of demand for a . rators telev1s10n sets anct c ·
commodity: re fr1ge ' . ars
as 1sh . m· come mcreases. As a tnak
lter
l. ~rice of the Commodity: T~ost of fact, all articles of ~omforts ilnd
p't'- _D ~ u~ortant determinant of the demand luxuries i.e. goods which make our
for a commodity is the own price of the 1:c more comfortable and enjoyabJ
~
{1 ~1' commodity. Normally, there is an inverse
we
belong to this category of norrnai
~
relationship between the price of the goods. As our income increases,
commodity and its quantity demanded. we can afford to purchase a larger
It imp1ies that lower the price of the
quantity of these goods.
commodity, the larger is the quantity
demanded; and the higher the price, (ii) Inferior goods (JG): Inferior goods are
the lesser is the quantity purchased. those goods the demand for which
You must have observed your mother falls with increase in income of the
purchasing more quantity of apples as the consumer and increases with fall
price of apples falls. ~..type o{...d.emand in income. So, there is an inverse
is... known as price demana. Th1i-c:-nrice
~ .- . . , r relationship between income of the
demand refers to different quantities-of consumer and the demand for inferior
a commodity which -are-;:mrchased at goods. For example, the demand for
different prices. We shall explain this in coarse cereals like maize or jowar
detail under the Law of Demand. may decrease when income increases
2. Income of the Consumer: Income of beyond a particular level because
the consumer is the basic determinant the consumers may substitute it by
of the quantity demanded of a product a superior cereals like wheat or rice.
as it determines the eurchasing1 .eo~ Coarse cereals, coarse cloth and black
'l ,t. ~ of the consumer. Generahy, there is a
1' and white television are examples
D\
direct relationship between the income of inferior goods. Consumers will
Y ~ \/of the consumer and. his demand for a purchase more of these goods at
product, i.e., with an increase in income, lower level of income. At low levels
the demand for the commodity increases. 0
_.!_ income, increase in income of
However, this may not always be the case.
~he consumers is accompanied by
While discussing the relationship increase in the demand ,for these
between income of the consumer and commodities. However once a
the demand for a commodity, we may certain level of income is 'achieved,
distinguish between three types of goods: fur th er increases in income are
(i) normal goods, (ii) inferior goods, accompanied by a fall in the
(iii) inexpensive necessities of lite.
demand for these commodities like
11
FRANK ISC ECONOMICS-Xii
