What are the Different types of Demand?
What are the different types of demand?
Demand can be distinguished from need and desire. A beggar may desire to have a car, a poor may need a modem house, but such needs and desires do not constitute any demand.What are the different types of demand
To be a demand following conditions should be fulfilled –
- A desire to buy anything,
- Having ability to pay,
- Willingness to pay,
- Accept the prevailing market price.
Also demand is always exposed in per unit of time, even per day, per week, per month and in per year.
What is meant by demand?
By demand, we mean a lot of quantities of a given commodity or service that consumers can buy in one market in a given period of time at different prices, or at different incomes or at different prices of related goods.
From the seller’s point of view, the demand price is the income that seller expects to earn from the sale of a unit of a commodity. Thus, we know that demand price is identical with the average revenue. Therefore, demand curve is also drawn
The different types of demand –
1. Price Demand –
Various quantities of a good/ service which a consumer will purchase at a given time at various prices. In price demand it is generally assumed that other things such as consumer’s income, taste, and prices of related goods remain unchanged. But the price of the concerned good/ service varies.
2. Income Demand –
Various quantities of a good which a consumer will purchase at a given time at various income levels. Here it is assumed that the price of the good itself; prices of related goods, and consumer’s taste, remain unchanged. But only consumer’s income varies.
Price demand expresses the relationship between price of the good and quantity demanded, while income demand exposes relation between income of consumer and demanded quantity. A change in quantity due to change in price is called change in quantity demanded; while a change quantity due to change in income is called change in demand.
3. Cross demand –
Various quantities of a good which a consumer will purchase at a given time at various prices of its related goods.
Here it is assumed that the price of the concerned good does not vary, and also other things such as consumer’s income and taste remain unchanged.
Related goods –
Related goods are of two types’ viz, substitute goods and complementary goods.
Substitute goods –
Substitute goods are capable of satisfying the same want, e.g., tea and coffee, rail transport and road transport. A change in the price of tea, for example will affect the demand for coffee.
Complementary goods –
Complementary goods are those goods which are wanted together to satisfy a want such as paper and pen.
Of these three types of demand, price demand is most commonly studied. We study the demand curve, law demand etc. relating to price demand.