The Law of Demand

Demand and supply are the basis for the functioning of any economy. Thus, it becomes important to understand the factors and laws that govern them. Understanding them is a complex thing if you are trying to do it on your own and you may always need help with homework for the same.

Demand is said to be the quantity of a commodity that the consumers purchase at various specific prices as per their will during a particular time period. Demand is referred to as an effective desire which means a person is having the ability to purchase and is ready to spend. It is always expressed at a particular price. It is also known as a flow concept which means demand is always expressed over a period of time like per day, per month, per year.

There are various types of demands that need to be taken note of for assignment help: –

1. Individual demand: It is a demand of a quantity of a commodity that is purchased by an individual consumer at his own will at various prices at a particular period of time. For example, the quantity of butter purchased per day by your father is individual demand for butter.
2. Market demand: The total quantities of a commodity that are bought by all the households upon their will at specific prices at a particular period of time, is called market demand. For instance, the total quantity of butter that is bought by all the buyers per day upon their will at a given price is the market demand of butter.
3. Ex-ante demand: Ex ante demand is the quantity of a commodity which consumers are willing to purchase during a specific period of time.
4. Ex post demand: The quantity of the commodity which is actually purchased by the consumers during a particular period of time, is called ex-post demand.
5. Joint demand: The demand for one good or more than one good that is demanded together or is used jointly, is known as joint demand. For example, pen and paper. They are also considered complementary goods.
6. Derived demand: Derived demand refers to the demand of those commodities which are derived from the demand of another commodity. For instance, the demand for pens depends upon the students.
7. Composite demand: Composite demand refers to the demand of that commodity that has multiple uses. For example, iron, steel, and milk.

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The determinants of demand that need to be understood for assignment help, are:

• Consumers’ tastes and preferences: When consumers’ tastes and preferences are favorable for a commodity the demand will be more and when unfavorable the demand will be less.

1. Substitute goods: Substitute goods refer to those goods that satisfy the same type of want and which also can be used in place of each other. For instance, Pepsi and coke, tea and coffee, etc. Consumers always prefer relatively cheaper goods.
2. Complimentary goods: The goods which are used together and jointly demanded are known as complementary goods. For example, pen and ink, etc. Complimentary goods have between price and demand of two goods.

• Distribution of income: If income is unequally distributed, the demand for luxuries will be more and necessaries will be less. If income is equally distributed, there will be no rich and no poor therefore, the demand for necessaries will be more and for luxuries, it will be less.

The law of demand tells us that the other things remaining constant, the quantity of a commodity that is demanded by the consumer rises when its prices fall, and it decreases when the prices rise. The law of demand contains the following assumptions:

• The income of the consumer should not change.
• The tastes and preferences of the consumers should not change.
• The prices of the related commodities should not change.
• The size of the population should remain unchanged.
• The distribution of income should remain unchanged.
• The change in price in the future is not expected.

Exceptions to the law of demand: –

1. Articles of Snob appeal: The concept is also known as conspicuous consumption in which all those items are included which are sources of wealth and meant for show-off. For example, luxuries like diamonds, expensive cars, etc.

When the price of such commodity falls the demand also falls as rich people decrease their demand at lower prices and rich people demand more when the prices rise. These goods are signs of ‘status symbol’.

2. Consumer expectations about future price: If the price of the commodity is rising and is expected to rise in the future, consumers will purchase more of a commodity even at the rise in prices in order to avoid the pinch of rising prices in the future.

When the prices are falling and are even expected to fall in the future,

the consumer will purchase less today even after falling prices in order to take advantage of falling prices in the future.

3. Emergencies: During an emergency like natural calamities, the consumer behaves in an abnormal way. He will not consider prices, he will purchase commodities even at a higher price in order to survive.
4. Change in fashion: Some consumers are fashion addicted. They will purchase the commodity which is in trend even at higher prices and they will not purchase the outdated commodity even at lower prices.

Therefore, these were a few basic points about demand and the law of demand which are basic to an understanding of any economy. They are sufficient enough for a student to understand the basics and get help with homework.