Types of Demand in Economics Class 12 & Demand Introduction
Here in this article, we will discuss the Demand of Microeconomics Class 12 of Economics Class 12 based on the syllabus of CBSE Class 12 Economics.
Demand is different from need, desire and wants. Needs are the basic necessities which are essential for survival like food, shelter, water, and clothing. Wants are something we don’t need actually, but it makes our life better. Desires are the extension of wants, something you wish to have regardless of need and want. Demand in economics refers to the desire to purchase the commodity-backed by purchasing power and willingness to pay for it.
The demand for a commodity is based on three elements –
- Willingness to buy
- Ability to buy
- Readiness to buy
Demand – definition
“The quantity of a commodity that consumer is willing to buy at a particular price during a particular period of time”
The demand definition highlights the price of a commodity, quantity of a commodity and period of time.
Types of Demand
The quantity demanded by a consumer due to the change in price. It refers to the quantity of commodities the consumer is willing to buy at a given price and time. There are two types of price demand-
(i) Individual Demand
When single consumer demand for a commodity. Thus, individual demand refers to the quantity of a commodity that an individual is willing to buy at a particular price during a particular period of time.
(ii) Market Demand
Market demand is the sum total of demand by all the individuals. It refers to the total quantity of a commodity that all the consumers are willing to buy at a particular price during a particular period of time.
When a consumer is willing to buy a quantity of a commodity at various levels of income while other things remaining the same.
Demand for two or more goods which are demanded together. For example, pen and ink, car and petrol, bread and butter, etc.
The demand for a commodity arises due to the demand for some other commodity. For example, the demand for steelworkers, due to increasing demand for steel.
Watch recorded lectures on Demand and Demand Function by clicking CBSE Class 12 Economics Classes.
Demand function refers to the functional relationship between demand and its determinants.
Dx=Fn (Pn, Y, T, E, S, G…)
Fn -Function of determinants like price, Income, taste, expectations, etc
Determinants of Demand/ Factors affecting the demand
Price -There is an inverse relationship between price and demand. When the price falls, demand increases and vice versa.
Income- Income determines the purchasing power of a consumer. There is a direct relationship between income and demand. In the following three types of commodities, demand varies with income.
- Normal goods- Those goods whose demand increases with the increase in income. For e.g. demand for clothes
- Inferior Goods- Those goods whose demand decreases with the increase in income. For e.g, the demand for maize will decrease with an increase in income.
- Inexpensive goods for necessity- demand these goods increase with an increase in income only to a certain level. For e.g. demand for the matchbox.
Taste and preference of a consumer- demand changes with the change in taste, lifestyle or preference. In such a case consumers may switch demand from cheaper to expensive goods. For e.g. demand for costlier jeans.
Price of related goods-
- Substitute goods- Those goods who satisfies equal demand. For e.g Tea and coffee. There is a direct relationship between substitute goods demand and price.
- Complementary goods- goods which are consumed together and complement the demand. For e.g. car and petrol. When the price of petrol rise, the demand for car falls.
The expectation of a consumer- consumer expectation related to future price, income, goods availability, etc. For e.g. in case of war emergency consumers demand goods to store them.
Distribution of income- unequal distribution of demand in the country leads to an increase in demand for luxury goods.
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Tag – Demand; Types of Demand; Economics Class 12