Geography and Regional Planning 3rd Semester

Demand, Demand Function and Its Types, Demand Schedule and Demand Curve
of Individual Demand and Market Demand, Factors Affecting Demand, Law of
Demand, Assumption and Expectations of Law of Demand, Shift and Movement,
Change in Quantity Demand and Change in Demand.
1st Definition:-

 Demand indicates how much of a good consumers are both willing and able to buy at each
possible price during a given time period, other thing constant.

2nd Definition:-

 Demand indicates that a consumer is willing to purchase and power to purchase some goods in
specific period of time.

Three Factors OF Demand.

1. Willing to purchase.
2. Power to purchase.
3. Specific period of time.

3rd Definition:-

 Demand is an economic principle that describes that consumer’s desire and willingness to pay a
price for a specific good or service.

Three elements of demand:-

1. Desire to acquire a commodity.

2. Willingness to pay price for it.
3. Ability to pay for it.

4th Definition:-

 Demand for a commodity refers to the desire to buy a commodity backed with sufficient
purchasing power and the willingness to spend.

For Example: You desire to have a Car, but you do not have enough money to buy it. Then, this desire
will remain just a wishful thinking, it will not be called demand.

If in spite of having enough money, you do not want to spend it on Car, demand does not emerge.

The desire become demand only when you are ready to spend money to buy Car.

In Economics, demand refers to effective demand, which implies three things:

a) Desire,

b) Means to purchase, and

c) On willingness to use those means for that purchase

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Micro Economics Awais Bakshy
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5th Definition:-

 Demand of commodity refers to the quantity of a commodity which a consumer is willing to buy
at a given price, and time.

6th Definition:-

 It is the relationship between quantity demanded and price, c.p., within a specific period.

Or

 It is the relationship between the maximum willingness to pay in return for something of value

7th Definition:-

 It refers to the quantity of a commodity which a consumer is willing to buy at a particular price
during a particular period of time.
8th Definition:-
Will to purchase and power to purchase something in specific period of time is called demand.

Function of Demand:-

1st Definition:-

A demand function is a statement of the relation between the demand for a product and all variables
(factors) that affect demand.

It is also defined as the relation between the consumers’ optimal choice of the quantity of a goods and
its price is called the demand function.

Its formula for Demand Function is q= d (p)

2nd Definition: -

Demand Function is the functional relationship between demand and factors affecting demand.

3rd Definition: -

The functional relationship between the quantity demanded (Qd) and those factors, which can influence
the demand, is called demand function. Mathematically it can be expressed as;

Qd= f(p, y, w, t, pop, ps)

Dx = f (Px, Po, Y, T, E) ………………………………………. Qd= f (p, y, Test, Pr, Fashion, Emergency)

There Are Two Types of Demand Function:-

1. Individual Demand Function

2. Market Demand Function

Individual Demand Function:-

It shows how demand for a commodity, by an individual consumer in the market, is related to its various
determinants.

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Micro Economics Awais Bakshy
 Geography and Regional Planning 3rd Semester

Dx= f (Px,Px,Y,T,E)

1. Price of commodity: - Other things being equal, with the rise in price of commodity, its demand
contracts, and with a fall in price its demand extends. This inverse relationship between price of
the commodity and its demand is called Law of Demand.
2. Price of other goods: - Demand for good x is influenced by the price of other goods (z). Is called
cross price demand.
Dx= f (Pz)
3. Income of Consumer: - Change in the income of the consumer also influences his demand for
different goods. The demand for normal goods tends to increase with increase in income and
vice versa. On the other hand, the demand for inferior goods like coarse grain tends to decrease
with the increase in income and vice versa.
4. Taste and Preferences:-The Demand for goods and services depends upon the individual taste
and preferences. They include fashion, habit, custom etc. Taste and Preferences of the
consumer influenced by advertisement, change in fashion, climate and new inventions etc.
5. Expectation: - If the consumer expects that price in future will rise, he will buy more quantity in
present, at existing price. Likewise if the consumer expects that price in future will fall, he will
buy less quantity in present, or may even postpone his demand.

Market Demand Function:-

 Market Demand Function shows how market demand for a commodity is related to its various
determinants. It is expressed as under:
Mkt. Dx =f(Px,Pr,Y,T,E,N,Yd)
A part from the above factors, we can Say that only two types of new factors are added in
market demand function. This are:
N = Population Size
Yd = Distribution of Income.
1. Population Size: Demand increase with increase in population and decrease with decrease in
population. That is because within increase in population size, the number of buyers of product
tends to increase. Composition of population also affects demand. If composition of population
change, e.g. female population increases, demand for goods meant for women will go up.
2. Distribution of Income: Market demand is also influenced by change in the distribution of
income in the society. If income is equally distributed, there will be less demand. In case of
unequal distribution, most people will have enough money to buy things.

Factors Affecting Demand:-

 Price of Commodity: When the price of commodity rises demand of commodity will decrease
and vice versa.
 Price of other related commodity: Price of other commodity affect the demand of commodity in
two ways:
 Substitute Goods:- In the case of substitute goods, the demand for a commodity rises with a rise
in the
 Price and fall with the fall in price. Example- Tea and coffee

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Micro Economics Awais Bakshy
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 Complementary Goods: - In case of complementary goods, the demand for a commodity rises
with fall in the Price and decreases with the rise in the price of complementary goods. Example:
Car and Petrol, Ink and Pen, Bread and Butter.
 Income of Consumer: - When the Income of Consumer rises the demand of normal goods
increases and if the income decreases the demand of normal good decreases.
 In case of Inferior good the demand will decrease with rise in income and increase with
decrease in income.
 Taste and Preference: - If the taste and preference of consumer develop for a commodity the
demand will rise.
 Expectation: - If the consumer expects that price in future will rise the demand will rise and vice-
versa.
 Population: - More population, more demand, less population less demand.
 Climate: - The demand of commodity changes according to the climate.

Demand Schedule:-

Demand Schedule is that schedule which expresses the relation between different quantities of the
commodity demanded at different price.

According to Samuelson, “The table relating to price and quantity demanded is called the demand
schedule.

Demand Curve:-

Demand curve is a curve which shows the various combination of two goods or commodities consumer
can purchase at different prices.

It is a curve which shows the negative relationship between the price and quantity demanded of good.

Demand Curve is simply a graphic representation of demand schedule.

According to Leftwitch, “The Demand Curve represents the maximum quantities per unit of time that
consumer will take at various prices.

Demand Schedule and Demand Curve are of two types

1) Individual Demand Schedule & Individual Demand Curve

2) Market Demand Schedule & Market Demand Curve

Price of P (per unit in Rs.)

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Micro Economics Awais Bakshy
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Price of P (per
unit in Rs.)

It is seen that as the price of the commodity increases, quantity demanded tends to decrease. And when
price falls, the quantity demanded increases.

In Figure points a, b, c, d, and e demonstrates the relationship between price and quantity demanded at
different price levels. By joining these points, we have obtained a curve, DD, which is termed as the
individual demand curve.

The slope of an individual demand curve is downward from left to right that indicates the inverse
relationship of demand with price.

Factors affecting market demand, PINTE:-

P = Prices
I = income
N = number of buyers
T = tastes or preferences
E = expectations about future prices and market conditions

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Law of Demand:-

The Law of Demand States that, other things being constant (Ceteris Peribus), the demand for a good
extends with a decrease in price and contracts with an increase in price.

In other words, there is an inverse relationship between quantity demanded of a commodity and its
price.

The term other thing being constant implies that income of the consumer, his taste and preferences and
price of other related goods remains constant.

Explanation:-

The table shows that when the price of say, orange, is Rs. 5 per unit, 100
units are de-manded. If the price falls to Rs.4, the demand increases to 200
units.

Similarly, when the price declines to Re.1, the demand increases to 600
units. On the contrary, as the price increases from Re. 1, the demand
continues to decline from 600 units.

In the figure, point P of the demand curve DD1 shows demand for 100
units at the Rs. 5. As the price falls to Rs. 4, Rs. 3, Rs. 2 and Re. 1, the
demand rises to 200, 300, 400 and 600 units respectively.

This is clear from points Q, R, S, and T. Thus, the demand curve DD1
shows increase in demand of orange when its price falls. This indicates
the inverse relation between price and demand

Assumptions Law of Demand: -

1) Tastes and Preferences of the consumers remain constant.

2) There is no change in the income of the consumer.

3) Prices of the related goods do not change.

4) Consumers do not expect any change in the price of the commodity in near future.

Exception of law of demand: -

1. Status symbol commodity

2. Fear of storage
3. Ignorance
4. Speculation
5. Giffin goods

Status Symbol Commodity: -There are certain commodity which has prestige value i.e., car, jewelries,
diamonds, luxury product.

Fear of shortage: -If people feel that in future there will be the shortage of the commodity they would
like to store more commodity at any price. Eg: Food grain, Transport.

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Micro Economics Awais Bakshy
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Ignorance: -Sometimes consumers may be ignore about the price prevailing in the market due to
ignorance it may not be possible for him to purchase more units at a lower price. Eg: Vegetables
Shopping.

Speculation: -The law of demand doesn’t apply in case of speculation. Normally speculation occurs in
the stock exchange market.

Giffin Goods: -Sometimes people buy less goods at a lower price & more of it at higher price. Eg: Street
vendor.

Why demand curve has –ve slope: -

1. Law of Diminishing Marginal Utility: -According to this law, as consumption of a commodity

increases, the utility from each successive unit goes on diminishing to a consumer.
Accordingly, for every additional unit to be purchased, the consumer is willing to pay less and
less price. Thus, more is purchased only when price of the commodity falls.
2. Income Effect: -Income effect refers to change in quantity demanded when real income of the
buyer changes as a result of change in price of the commodity.
Change in the price of a commodity causes change in real income of the consumer.
With a fall in price, real income increases. Accordingly, demand for the commodity expands.
3. Substitution Effect: -Substitution effect refers to substitution of one commodity for the other
when it becomes relatively cheaper.
Thus, when price of commodity X falls, it becomes cheaper in relation to commodity Y.
Accordingly, X is substituted for Y.
4. Size of Consumer Group: -When price of a commodity falls, it attracts new buyers who now can
afford to buy it.
5. Different Uses: -Many goods have alternative uses. Milk, for example, is used for making curd,
cheese and butter. If price of milk reduces its uses will expand.
Accordingly, demand for milk expands.

Change in Quantity Demanded & Change in Demand: -

In economics the terms change in quantity demanded and change in demand are two different
concepts.

Change in quantity demanded refers to change in the quantity purchased due to increase or decrease in
the price of a product.

In such a case, it is incorrect to say increase or decrease in demand rather it is increase or decrease in
the quantity demanded.

On the other hand, change in demand refers to increase or decrease in demand of a product due to
various determinants of demand, while keeping price at constant.

Extension and Contraction of Demand (Change in Quantity Demanded)

The variations in the quantities demanded of a product with change in its price, while other factors are
at constant, are termed as expansion or contraction of demand. Expansion of demand refers to the

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Micro Economics Awais Bakshy
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period when quantity demanded is more because of the fall in prices of a product. However, contraction
of demand takes place when the quantity demanded is less due to rise in the price of a product.

For example, consumers would reduce the consumption of milk in case the prices of milk increases and
vice versa. Expansion and contraction are represented by the movement along the same demand curve.
Movement from one point to another in a downward direction shows the expansion of demand, while
an upward movement demonstrates the contraction of demand.

Increase and Decrease in Demand (Change in Demand): -

Increase and decrease in demand are referred to change in demand due to changes in various other
factors such as change in income, distribution of income, change in consumer’s tastes and preferences,
change in the price of related goods, while Price factor is kept constant Increase in demand refers to the
rise in demand of a product at a given price.

On the other hand, decrease in demand refers to the fall in demand of a product at a given price.

Increase and decrease in demand is represented as the shift in demand curve. In the graphical
representation of demand curve, the shifting of demand is demonstrated as the movement from one
demand curve to another demand curve. In case of increase in demand, the demand curve shifts to
right, while in case of decrease in demand, it shifts to left of the original demand curve.

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Geography and Regional Planning 3rd Semester

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