Demand is the quantity of a good or a service that is purchased by a consumer, or the customer wills to purchase at a certain price. if we want to buy anything, that is not only conditioned to be demand.
R F Benham said ” demand for anything at a given price, is the amount of it which will be bought per unit of time at that price.
Three conditions are to be fulfilled to make a demand in economics.
- Wish to get any goods
- Afford to buy it
- Wish to spend money on that.
Factors of demand:
Good’s own price: The basic demand relationship is between potential prices of a good and the quantities that would be purchased at those prices. Generally, the relationship is negative meaning that an increase in price will induce a decrease in the quantity demanded. This negative relationship is embodied in the downward slope of the consumer demand curve. The assumption of a negative relationship is reasonable and intuitive. For example, if the price of a gallon of milk rose from $5 to a price of $15, this is a big price increase. This significant price increase causes the consumer to demand less of that product at the price of $15 because not only is it more expensive, but the new price is very unreasonable for a gallon of milk.
Price of related goods: The principal related goods are complements and substitutes. A compliment is a good that is used with the primary good. Examples include hotdogs and mustard, beer and pretzels, automobiles and gasoline. (Perfect complements behave as a single good.) If the price of the complement goes up the quantity demanded of the other good goes down.
Personal Disposable Income: In most cases, the more disposable income (income after tax and receipt of benefits) a person has, the more likely that person is to buy.
Tastes or preferences: The greater the desire to own a good the more likely one is to buy the good. There is a basic distinction between desire and demand. Desire is a measure of the willingness to buy a good based on its intrinsic qualities. Demand is the willingness and ability to put one’s desires into effect. It is assumed that tastes and preferences are relatively constant.
Consumer expectations about future prices, income and availability: If a consumer believes that the price of the goodwill be higher in the future, he/she is more likely to purchase the good now. If the consumer expects that his/her income will be higher in the future, the consumer may buy the good now.
Population: If the population grows this means that demand will also increase.
Nature of the good: If the good is a basic commodity, it will lead to a higher demand
law of demand:
All other things being unchanged, at a particular time, if the price of goods falls, the quantity of demand rises and if the price rises the quantity falls. Such an inverse relationship between price and quantity is known as the law of demand.
The other factors being unchanged means here, the taste of the buyer habit, likings, income etc will be constant.
In the list, here in the lowest price of a product, the quantity is highest. If the price increases the quantity falls. On the other hand, if the price rises, the quantity falls.when the price is tk 2, the quantity is 16 units, when the price is increasing, the quantity is falling. Here we can see the inverse relationship between price and quantity demanded.