factor affecting demand can be classified in to how many categories?
Answers
Explanation:
Define demand. Explain any four important factors that affect the demand for a commodity.
Answer:
(A) Definition of demand
Demand may be defined as the quantity of a commodity that a consumer is able and willing to buy, at each possible price, over a given period of time.
Essential elements of demand are Quantity, Ability & Willingness, Prices and period of time.
(B) Following are the important factors that affect the demand of a commodity:
(a) Own price of the given commodity [Pi20 Car Di20 Car] [Pi20 Car Di20 Car]…Inverse Relation
Own price is the most important determinant of demand.
When own price of a commodity falls, its demand rises and when own price rises, its demand falls.
Thus we can say that there is an indirect relation between the price of a commodity and its quantity demanded.
(b) Price of related goods Substitute Goods [PMaruti Swift Di20 Car]…Direct Relation
Complementary Goods [PPetrolDi20 Car]…Inverse Relation
RELATED GOODS ARE OF TWO TYPES – SUBSTITUTE AND COMPLEMENTARY
(i) SUBSTITUTE GOODS
When the price of the substitute goods rises then demand the given commodity also rises and vice-versa.
Like, if Price of Maruti Swift increases, demand for i20 will rise.
(ii) COMPLEMENTARY GOODS
(Car & Petrol) When the price of the complementary goods rises then demand the given commodity falls and vice versa.
Like, if the price of petrol rises, demand for cars fall.
(c) The income of the consumer [IncomeHouseholdDNormal Goods]…Direct Relation
[IncomeHouseholdDInferior Goods]…Inverse Relation
To check the effect of change in income of the households over their demand, goods are divided into two categories:
(i) Normal Goods (Positive relation)
These are the goods whose demand rises with the rise in income. E.g. Basmati Rise
(ii) Inferior Goods (Negative relation)
These are the goods whose demand falls with the rise in income and vice versa. e.g. Low-quality rice.
(iii) Necessities:
A third category is also there, necessities, demand for these generally does not change with change in income e.g. life-saving drugs.
(d) Taste and preferences of the consumer
Demand for a commodity is also affected by taste and preferences.
It rises if there is a favourable change in the taste and preferences of the consumer and vice versa.
(e) Miscellaneous
Future expectation about price and income also affect the demand for a commodity is present.
Suppose, if we expect a rise in price in the near future, then we’ll increase demand in present even at the same price.
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11th
Economics
Consumer Equilibrium and Demand
Introduction to Demand
State the types of demand.
ECONOMICS
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Asked on October 15, 2019 by
Muhammad Asif
State the types of demand.
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ANSWER
Demand is generally classified on the basis of various factors, such as nature of a product, usage of a product, number of consumers of a product, and suppliers of a product.
The different types of demand are as follows:
i. Individual and Market Demand:
It refers to the classification of demand of a product based on the number of consumers in the market.
Individual demand can be defined as a quantity demanded by an individual for a product at a particular price and within the specific period of time.
Market demand is the aggregate of individual demands of all the consumers of a product over a period of time at a specific price, while other factors are constant.
ii. Organization and Industry Demand:
This refers to the classification of demand on the basis of market.
The demand for the products of an organization at given price over a point of time is known as organization demand.
The sum total of demand for products of all organizations in a particular industry is known as industry demand.
iii. Autonomous and Derived Demand:
This refers to the classification of demand on the basis of dependency on other products.
The demand for a product that is not associated with the demand of other products is known as autonomous or direct demand. The autonomous demand arises due to the natural desire of an individual to consume the product.
On the other hand, derived demand refers to the demand for a product that arises due to the demand for other products. Moreover, the demand for substitutes and complementary goods is also derived demand.
iv. Demand for Perishable and Durable Goods:
This refers to the classification of demand on the basis of usage of goods. The goods are divided into two categories, perishable goods and durable goods.
Perishable or non-durable goods refer to the goods that have a single use.
On the other hand, durable goods refer to goods that can be used repeatedly.
v. Short-term and Long-term Demand:
This refers to the classification of demand on the basis of time period.
Short-term demand refers to the demand for products that are used for a shorter duration of time or for current period. This demand depends on the current tastes and preferences of consumers.
On the other hand, long-term demand refers to the demand for products over a longer period of time.
Generally, durable goods have long-term demand.