Demand in Economics – Complete Notes
1. Meaning of Demand
Definition:
Demand refers to the quantity of a good or service that consumers are willing and able
to purchase at various prices during a given period of time, ceteris paribus (all other
factors constant).
Key point: Demand is not just desire, but desire + willingness + ability to pay.
2. Types of Demand
Type Explanation Example
Individual
Demand by a single consumer Ali buys 2 pens at Rs. 20 each
Demand
Market Total demand of all consumers in If 100 students each buy 2 pens, market
Demand the market demand = 200 pens
Derived Demand for a good due to demand Demand for steel arises because of
Demand for another good demand for cars
Joint Demand Two goods demanded together Car + Petrol
Composite
Good demanded for multiple uses Electricity for light, AC, machines
Demand
3. Law of Demand
Statement:
“Other things being equal, when the price of a commodity falls, its demand rises; and
when the price rises, its demand falls.”
Explanation: There is an inverse relationship between price and demand.
, Price (Rs.) Quantity Demanded (units)
10 50
20 40
30 30
40 20
50 10
As price increases, demand decreases.
4. Demand Curve
Graphical representation of the law of demand.
Downward sloping from left to right (showing inverse relation).
5. Determinants of Demand
Besides price, demand is influenced by many other factors:
Determinant Effect on Demand Example
Price of If milk price rises, people buy less
Higher price → lower demand
Commodity milk
Income of Higher income → higher demand
More income → more cars bought
Consumers (normal goods)
Prices of Related Substitutes (Tea & Coffee), If coffee price rises, demand for tea
Goods Complements (Car & Fuel) increases
Tastes & Healthy lifestyle → more demand
Favorable tastes → higher demand
Preferences for organic food
More people = more demand for
Population More population → higher demand
housing
1. Meaning of Demand
Definition:
Demand refers to the quantity of a good or service that consumers are willing and able
to purchase at various prices during a given period of time, ceteris paribus (all other
factors constant).
Key point: Demand is not just desire, but desire + willingness + ability to pay.
2. Types of Demand
Type Explanation Example
Individual
Demand by a single consumer Ali buys 2 pens at Rs. 20 each
Demand
Market Total demand of all consumers in If 100 students each buy 2 pens, market
Demand the market demand = 200 pens
Derived Demand for a good due to demand Demand for steel arises because of
Demand for another good demand for cars
Joint Demand Two goods demanded together Car + Petrol
Composite
Good demanded for multiple uses Electricity for light, AC, machines
Demand
3. Law of Demand
Statement:
“Other things being equal, when the price of a commodity falls, its demand rises; and
when the price rises, its demand falls.”
Explanation: There is an inverse relationship between price and demand.
, Price (Rs.) Quantity Demanded (units)
10 50
20 40
30 30
40 20
50 10
As price increases, demand decreases.
4. Demand Curve
Graphical representation of the law of demand.
Downward sloping from left to right (showing inverse relation).
5. Determinants of Demand
Besides price, demand is influenced by many other factors:
Determinant Effect on Demand Example
Price of If milk price rises, people buy less
Higher price → lower demand
Commodity milk
Income of Higher income → higher demand
More income → more cars bought
Consumers (normal goods)
Prices of Related Substitutes (Tea & Coffee), If coffee price rises, demand for tea
Goods Complements (Car & Fuel) increases
Tastes & Healthy lifestyle → more demand
Favorable tastes → higher demand
Preferences for organic food
More people = more demand for
Population More population → higher demand
housing
