In this session, we will be discussing what is the theory of demand in economics, and also discussing what is demand in economics, Demand to mean in economics, Demand definition in economics, Demand characteristics in economics, Types of demand in economics, Determination of demand in economics, Demand function, meaning, the definition in economics, Demand function formula, Types of the demand function, The relationship between supply and demand, What is demand in marketing, What are demand in business, Microeconomics policy, and demand.
What is the Theory of demand in economics?
According to the human being, a Human being wants or desires something, which has been fulfilled their needs those is called demand. no matter which thing human wants because wants or desires can be anything, which is fulfilled their wants. for example, human wants or desires book buy for study, travel from one country to another country, computers, etc. these all are called demand.
But according to the demand in economics, Demand in economics is also the same meaning as normal demand but it can be described in a different way. so, let’s discuss in a simple way and deeply on-demand in economics.
What is demand in economics?
According to economics, demand, which is categorized by economics. Goods and services are those types of the quantity of a product, which are desires backed by a willingness and ability to pay by a consumer at a specific price and time, those are called demand in economics.
A desire without sufficient resources money income is merely a wish not a demand. A desire with money income but not interested to spend that money is also not a demand. so that to be an effective demand, there should be four components. they are desire, willingness to pay, ability to pay, demand at a given price and time.
In simple words described the demand in economics. According to the whole business organization. The whole business organizations of the world are depending on demand because demand is those types of character display in any business organization. for example, any business organization is running in the market, when their product’s demand is available in the market. Because markets are those types of places where individuals, households, and businesses are engaged in the buying and selling of products and services through various modes.
The working of a market is governed by two forces, which are demand and supply. These two forces, which play the most important role in determining the price of a product or service and the size of the market.
In the session on what is the theory of demand in economics, we will be also discussing the meaning of demand in economics.
Meaning of demand in economics
In economics demand, we mean the various quantities of given goods and services are those types of the quantity of a product, which are desires a willingness and ability to pay by a consumer at a specific time, at various prices, or at various incomes, or at various prices of related goods.
In the session on what is the theory of demand in economics, we will be also discussing the definition of demand.
Definition of Demand in Economics
The definition of demand given by the economist, which is categorized in 5 different ways.
The desire for a Commodity: – To create demand, the customer must initially develop a need or want to buy a particular product.
Ability to Buy: – He must have the paying capacity or purchasing power to acquire that commodity.
Willingness to Pay: – Only desire and ability to pay are not enough; one must have the willpower to spend his money on buying the commodity.
At Given Price: – The customer has to agree with the market price of the commodity to demand it.
In Given Time: – The commodity must be purchased within a particular period.
Therefore, the above definition is clearly defined there is no difference between demand and want, demand is considered as a synonym of want.
Definition of demand in relation to price
Some learned economists have expressed their views by co-relating demand with the price.
The demand definition defines by Prof. Mill has expressed, “We must mean by the word demand the quantity demanded and remember that this is not a fixed quantity but in general varies according to value.”
According to Waugh, who is define the definition of demand, “The demand for any commodity is the relationship between the price and the quantity that will be purchased at that price.”
Definition of Demand in relation to Price as well as Time
Mayers and Benham are worth mentioning economists who are of the view that demand is related, with both, price as well as time.
The demand definition defines by Mayers “The demand for goods is a schedule of the amount that buyers would be willing to purchase at all possible prices at one instant of time.”
According to Benham “The demand for anything at a given price, is the amount of it which will be bought per unit of time at that price.”
In the session on what is the theory of demand in economics, we will be also discussing the characteristics of demand in economics.
Characteristics of demand in economics
The characteristics of demand in economics can be dedicated to the following points.
- Dynamic in nature
- Depends on the price
- Depends on supply | Characteristics of Demand
- Demand controls the future of business
- Demand is sensitive to the competition
Dynamic in nature
Dynamic in nature is one of the first characteristics of demand in economics. These types of character are one of the most important characteristics of demand in economics. These types of characteristics have to ability to keeps all marketers on their toes. so, we will be described here the actual meaning of dynamic in nature. Dynamic in nature refers to those products, which demand never stays at one place or at the same in the market. we will be defining the meaning of dynamic in nature by taking one specific example. we will be describing both the winter and summer seasons here. In the winter the demand for woolen clothes will be high and at the time of summer, demand for cotton clothes increase. (theory of demand).
Moreover, the demand for products is not moreover on the basics of the season because the demand for products is also depending on the quality of the product or service. for example, any restaurant is running in the market to a specific time when they serve good food at reasonable prices. But the demand for food decreases when customers notice a decline in the quality of food.
Depends on the price
Depends on the price is one of the second characteristics of demand in economics. Depends on the price is also the importance of the characteristics of demand in economics, how. The product, which is manufacture by the company, then it is definitely correct the company has to authority to deciding their product price. because product price depending on the demand. So that, Demand is also sensitive to the price of products and services. The company, which wants to increase its product demand in the market then one thing companies pay so much attention to while deciding the price of the product. that’s one is price. because the price value is of your product should not exceed the price of the products of your counterparts.
However, most companies decide the price of their products based on reverse psychology. They believe that people will buy their products if they sell their products at higher prices. Because it is fundamental human nature that they think that they get the right quality product by paying more. for example, the company of iPhone. In the market, the value of iPhone products is higher after that people are buying because the products of iPhone are valuable and quality able and also the people who buy the product of iPhone is also called the valuable person in the society.
Depends on supply | Characteristics of Demand
Depends on supply is one of the second characteristics of demand in economics. Depends on supply is also the importance of the characteristics of demand in economics? How, In the market or any business organization, supply and demand both are the most important roles display. because Supply and demand an inversely proportional to each other. because in the market people who have ready for any amount of the product in those situations, when the demand of the product is increase but the supply is low.
Demand controls the future of business
Demand controls the future of business is one of the last second characteristics of demand in economics. Demand controls the future of business is also the important of the characteristics of demand in economics. How, the whole business organization of the world depending on the demand because the demand is the most important role display in the market. the company which is produces those types of products, whose demand are in the market. if the company doesn’t manufacture those types of products, then the company has to face a loss. (theory of demand).
Demand is sensitive to the competition
Demand is sensitive to competition is one of the last-second characteristics of demand in economics. Demand is sensitive to the competition is also the importance of the characteristics of demand in economics. How Competition affects demand big time. If you are launching your product in the market if the demand for your product will be at a peak when you have a monopoly in the market. then you can sell your product at the desired price, and people would still want it in case of a monopoly.
But the competition in the market decreases the value of the product. Your customers will get divided even when there is still demand for your product in the market.
In the session on what is the theory of demand in economics, we will be also discussing the types of demand in economics.
Types of demand in economics
The types of demand in economics can be dedicated to the following points.
- Joint demand
- Composite demand
- Cross demand
- Price demand
- Income demand
- Competitive demand
- Direct and derived demand
Joint demand is one of the first types of demand in economics. Joint demand is the type of demand, which are displaying two commodities to satisfy a single need or want. for example, car and petrol, bread and butter, pen and refill, cereal and milk or peanut butter and jelly, etc. these all are those commodities, which satisfy a single need or want. (theory of demand).
However, in the case of joint demand, a rise in the price of one commodity results in the fall of demand for the other commodity. for example, rise in the price of petrol then the quantity demand of for cars decreased.
Composite demand is one of the second types of demand in economics. Composite demand is that type of demand, which is displaying single commodities or services but their uses are multiple. for example, electricity, corn, steel. electricity is a single commodity or service for lighting, heating, transportation for the use of the different electrical devices.
According to composite demand, a change in price results in a large change in demand. This is because the demand for the commodity or service would change across its various usages.
Price demand is one of the third types of demand in economics. The price of the product is an important determinant of demand. On the basis of the relationship between price and demand, the low of demand is developed by the economist. for example, demand for cars depends on the price of the car, other things remaining the same. (theory of demand)
Price demand can be mathematically expressed as follows:
Dx = f(px)
Dx = demand for goods x
Px = price of good x
f = Function
Px =Price of product x
Income demand is one of the fourth types of demand in economics. When the consumer income (Y) determines the quantity demanded of goods, then it is known as income demand. For example, demand for washing machine increase, with the increase in the consumer income.
The relationship between demand and income can be mathematically expressed as follows:
DA = f (YA),
Dx = Demand for commodity x
f = Function
Y= Income of consumer x
Cross demand is one of the last third types of demand in economics. If the price of one good affects the quantity demanded of another good, then it is called cross demand. Goods are either complementary or substitutes.
In the case of substitute goods, when the price of one good increases, the quantity demand for the next goods also increases. For example, if the price of coffee increases, then most of the coffee to tea, so that demand for tea increases. (theory of demand)
Similarly, in the case of complementary goods, when the price of one good increases, the quantity demand of the next good decries. For example, when the price of petrol increase, the demand for car decries because car riding becomes more expensive.
Mathematically, cross demand can be expressed as follows:
Dx = f (Py),
Dx = Demand for commodity x
f = Function
Py = Price of commodity y