What is Demand?
Demand is the economic principle that refers to a consumer's desire to purchase goods and services and its willingness to pay a price for a specific good or service. Other factors being constant, with an increase in the price of a good or service it will decrease the quantity demanded and vice versa. Market demand, whereas, is the total quantity that is demanded across all the consumers in a market for a particular good. This aggregate demand is defined as the total demand for all the goods and services that are present in an economy. Multiple stocking strategies are used to handle this demand.
Recognizing the Demand Schedule
The most common demand schedule has two columns. In the first column, prices for products are shown in ascending or decreasing order. The quantity of the product required or demanded at that price is listed in the second column. The pricing is set after thorough market research.
When the data from the demand schedule is graphed to generate the demand curve, it provides a visual representation of the price-demand connection, allowing for simple calculation of demand for a product or service at any point along the curve.
Explain Demand Schedule
The Law of Demand states that when the price of a commodity falls, the demand increases and also when the price of the commodity rises, the demand decreases, while other things remain constant. So, there exists an inverse relationship between the price and quantity that is demanded of this commodity. The functional relationship between the price and the quantity demanded can be represented as:
Dx = f(Px).
Now we should know what a Demand Schedule is.
This is a statement in a tabular form that shows different quantities which are being demanded at different prices. There are two types of Demand Schedules:
Individual Demand Schedule
Market Demand Schedule
In economics, a demanding schedule is a table that shows the quantity that is demanded of a good or service at different price levels. A demand schedule can also be graphed as a continuous demand curve on a chart where the Y-axis represents the price and the X-axis represents the quantity.
Demand Schedules vs. Supply Schedules
A demand schedule is typically used together with a supply schedule, that shows the quantity of a good which would be supplied to the market by the producers at given price levels. By drafting these graphs, both the schedules on a chart with the axes described above, it is possible to obtain a graphical representation of the supply and the demand dynamics of a particular market.
Also, in a typical supply and demand relationship, as the price of a good or the service rises, the quantity demanded drops and falls. When all these factors are equal, the market reaches its equilibrium, there the supply and demand schedules intersect with one another. At this point, the corresponding price is the equilibrium market price, and the corresponding quantity is the equilibrium quantity that is exchanged in the market.
Additional Factors on Demand
Price not being the sole factor determines the demand for a particular product. The demand may also be affected by the amount of disposable income available, shifts in the quality of the goods in question, effective advertising, and other weather shifts.
Price changes in the related goods or services may also affect the demand. Here the price of one product rises, and the demand for a substitute may rise, also a fall in the price of a product may increase the demand for the complementary goods. For example, a rise in the price of one brand of the coffeemaker will increase the demand for a relatively cheaper coffee maker that is produced by a competitor. If the price of all coffee makers falls, the demand for coffee, which is a complement to the coffeemaker market, may rise as consumers may want to take advantage of the price declining in the coffeemakers.
Individual Demand Schedule
This is a demanding schedule that illustrates the demand of an individual customer for a commodity in relation to the price.
Let us study, by referring to an example.
The above schedule represents the individual demand schedule. Here when the price of the commodity is ₹100, its related demand is 50 units. Also, when the price is ₹500, then its demand decreases to 10 units.
So, we can conclude that as the price falls the demand increases and as the price rises the demand decreases (Vice Versa). Thus, we see there is an inverse relationship between the price and the quantity demanded.
Individual Demand Curve
Below is a graphical representation of the individual demand schedule, where the X-axis represents the demand and the Y-axis represents the price of the commodity.
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The above demand curve shows the demand for the fuel that is Gasoline. The price of gasoline is 3.5 per litre, the demand is 50 litres and as the price is 0.5 per litre, the demand is 250 litres.
The Elasticity of Demand
Demand elasticity, also known as price elasticity of demand, is the degree to which rising prices translate into decreased demand. The demand elasticity of corn is 1 if a 50% increase in corn prices induces a 50% decrease in the amount of maize desired. The demand elasticity is 0.2 if a 50% increase in maize prices only reduces the amount desired by 10%. For items with greater elastic demand, the demand curve is shallower (near to horizontal), whereas, for products with less elastic demand, the demand curve is steeper (closer to vertical).
A new demand curve must be generated whenever a factor other than price or quantity changes. Assume that the population of a region grows, resulting in an increase in the number of mouths to feed. In this situation, even if the price remains unchanged, more maize will be requested, causing the curve in the graph below to move to the right (D2). To put it another way, demand will rise.
Conclusion
Demand is the economic principle that refers to a consumer's desire to purchase goods and services and its willingness to pay a price for a specific good or service. The Law of Demand states that when the price of a commodity falls, the demand increases; while other things remain constant.
FAQs on Demand Schedule
1. Explain the Demand Schedule.
The Law of Demand asserts that when the price of a commodity falls, demand rises, and vice versa, when the price of a commodity rises, demand lowers, while all other factors remain constant. As a result, the price and quantity demanded of this commodity have an inverse relationship. The following is a representation of the functional relationship between price and quantity demanded:
Dx = f(Px)
2. What is the difference between Schedules of Demand and Schedules of Supply?
A supply schedule, which indicates the quantity of an item that would be provided to the market by producers at given price levels, is frequently used in conjunction with a demanding schedule. It is feasible to generate a graphical depiction of the supply and demand dynamics of a particular market by drafting these graphs, both the schedules on a chart with the axes mentioned above.
In a normal supply and demand connection, as the price of a commodity or service rises, so does the amount demanded. The market reaches equilibrium when all of these elements are equal, at which point the supply and demand schedules intersect. The corresponding price is the equilibrium market price at this instant, and the corresponding quantity is the market's equilibrium quantity.
3. Explain the concept of individual demand.
Individual demand, often known as household demand, is the desire for an item or service by an individual. Individual demand is the result of a person's wishes for the quantities of products and services that he or she can afford in combination.
4. What does "Quantity Demanded" mean?
The quantity desired refers to the number of items a consumer is willing to purchase at a specific price. The amount of quantity needed changes as the buyer's requirement increases or decreases. In economics, the word quantity requested refers to the total amount of an item or service that consumers demand during a specific period of time. This is determined by the price of a good or service in a market, independent of whether or not the market is in equilibrium. The demand curve, or simply demand, is the relationship that exists between the quantity demanded and the price. The elasticity of demand is the degree to which the amount demanded fluctuates in relation to the price.
5. Define cost.
The price of a product is the amount of money that must be paid in order to obtain it. Price may also be referred to as the measure of value because it is the amount that individuals are willing to pay for a thing that symbolises their own value. Pricing is the process of determining the amount of money a manufacturer will get in exchange for services and commodities. When determining the cost of a product or service, the identity of the products and services - the cost of similar goods and services available in the market - must be taken into account.
6. What is the meaning of Quantity Demanded?
The quantity demanded means the number of goods that a buyer is willing to buy at a given price. This increase or decrease in the buyer's requirement changes the amount of quantity demanded. Quantity demanded is a term that is used in economics to describe the total amount of a good or service which the consumers demand over a given period of time. This depends on the price of a good or the service in a marketplace, that is regardless of whether that market is in equilibrium or not. The relationship which has caused between the quantity demanded and the price is known as the demand curve, or simply the demand. The degree to which the quantity demanded changes with respect to the price is known as the elasticity of the demand.
7. Define Price.
Price is the amount of money that is required to be paid to acquire a given product. This is the amount which people are prepared to pay for a product that represents their own value, price can also be termed as the measure of value. Pricing is a process of fixing the value which a manufacturer will receive in the exchange of services and goods. Fixing the cost of a product and services, this following point is required to be considered, which is the identity of the goods and services - the cost of similar goods and services that is situated in the market.
8. Explain Individual Demand.
Individual demand is the demand for a good or a service that is by an individual also known as a household. Individual demand comes from the interaction of an individual's desires for the quantities of goods and the services that he or she is able to afford.
