Question

Write short note on Types of demand

Answer 1

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 demand for a particular product would be different in different situations.

Therefore, organizations should be clear about the type of demand for their products.

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Figure-1 shows the different classifications of demand:



The different types of demand (as shown in Figure-1) are discussed as follows:

i. Individual and Market Demand:

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. For example, Mr. X demands 200 units of a product at Rs. 50 per unit in a week.

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The individual demand of a product is influenced by the price of a product, income of customers, and their tastes and preferences. On the other hand, the total quantity demanded for a product by all individuals at a given price and time is regarded as market demand.

In simple terms, 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. For example, there are four consumers of oil (having a certain price). These four consumers consume 30 liters, 40 liters, 50 liters, and 60 liters of oil respectively in a month. Thus, the market demand for oil is 180 liters in a month.

ii. Organization and Industry Demand:

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. For example, the demand for Toyota cars is organization demand. The sum total of demand for products of all organizations in a particular industry is known as industry demand.

Answer 2

Answer:

Demand can be classified based on various factors. However, there are two major types of demands:

1. Direct demand- This refers to the demand for goods and services which are directly desired by consumers. The utility derived from consuming these determines this type of demand. Example: Winter garments during winter.

2. Derived demand- The intermediate goods required to provide the final goods and services to the consumers is referred to as the derived demand. Example: Machines required to manufacture the garments.