What is Demand?
“Rita desires to buy a house.” A closer inspection to this sentence reveals that Rita just has expressed the desire to own a house but its not clear if she can really buy the house. In simple words, its not clear if Rita wishes to pay the price of the house to fulfill her desire.
Desire and needs standsat the same level. There is no end to desire or need ever. There is only temporary phase where we feel that our need is fulfilled. As one level need gets fulfilled it leads to another one and there is no stopping.
In a market there are many factors that can affect demand for a product or service. These factors are:
- Price and Price of other goods (e.g. Increase in prices of Mangos leads to low consumption of the fruit and viceversa. Substitute and Complimentary products: Subsitutes like tea and coffee. If the price of tea increases people will opt for coffee and viceversa. Complimentary products like tea and sugar. You can not make tea without sugar and so they are complementary products. If price of one increases then other’s price will automatically increases.
- Income (e.g. Increase in dad’s income increases kid’s pocket money demand and also other family expenditure.)
- Economy (e.g. Economy on boom or recession)
- Taste and Preferences (e.g. Style keeps on changing and so does people’s taste and preference)
- Population or number of buyers (demand for land increase as the population increases.)
- Quality( Cost of Music CD is more that cassattes as the quality is also more.)
- Future Expectation (e.g. An increase in expected future price of a good increases current demand)
With every other factord constant, price is the main cause of change in demand. We can talk more about Demand and related terms in next posts. Please let me know your all’s thoughts.
-Durga Sharma
