Understanding concepts of demand


Are you a student of economics? Here is a basic explanation of definitions of demand. Demand is a single word and its one-liner definition can be understood in brief and one can develop better basics of the subject matter.

Introduction

In our day-to-day life, we desire to accumulate things, to satisfy our needs and wants. Our needs provoke our demand. But do all desires lead to demand? Generally in laymen's language demand and desire are used interchangeably but both of them are distinct in the language of economics. Basic concepts of demand are necessary to understand by student economics and hence need to be explained very carefully.

Defining demand


If we look at the definition of demand, then it is, the desire to purchase a commodity, backed up by sufficient purchasing power and willingness to spend money. But, this one-liner definition can explain the whole concept of demand, which can be understood with the following example:

Suppose Mr. A belongs to a middle-class family, one day saw a helicopter flying in the sky and at the same time, an idea stuck into his mind that, "why not have a charter plane?" The idea explained above is part of A's desire but can we call it "demand"?

The answer is 'no' because A does not have sufficient money to acquire that helicopter. But, suppose if A gets money by some windfall gain then we can conclude that now A has sufficient purchasing power to make a demand. But, still, it can not be called demand, as A may not be willing to spend on such costly things even after having money which is due to various factors such as his upbringing in a middle-class family that governs his mental status or high maintenance cost of owning a helicopter. Thus we can conclude that desire is of no use until we have sufficient money to fulfil desire and money is of no use until we have the willingness to spend it.

So, it is clear from the above-given explanation that to constitute effective demand, desire, purchasing power and willingness to spend are the most factors and in the absence of any one of them, we can't conclude it as demand.

How demand is expressed?

Just understanding what constitutes demand is not satisfactory it is necessary to know how this demand is expressed?

We can demand some commodity or even service. Hence it is necessary to mention the "quantity" we want to purchase. So the second definition of demand is the quantity of a commodity a consumer wish to purchase at a given period of time at different prices. Quantity expressed depends upon the period. For instance, Mr. A wants to gift a bouquet to his friend on friendship day and he enquired about the price of a bouquet five days ago which is Rs.300. Now on the friendship day demand of bouquets is very high and hence seller is charging Rs.500 for the same bouquet about which he had enquired about five days ago. But, still, he is ready to pay Rs.500 due to urgency and the need factor. Hence the quantity of commodity depends upon period as on a general day no one will be willing to spend Rs.200 more.

From the above-given facts, it is clear, different quantities can be purchased at different prices depending upon the period.

Hence, from the above-given examples definitions of demand can be understood thoroughly and with complete concepts and one need not have rote definitions if he understands them in such an explanatory way.

Frequently Asked Questions

Is there any difference between "change in demand" and "change in quantity demanded"?
Yes, change in demand is due to the own price of a commodity while change is the quantity demanded resulted due to change in other factors.
How is demand expressed?
It is expressed, firstly, at a particular point in time, and secondly at different prices.
What type of concept is demand?
Demand is a flow concept because it is expressed for a period of time.


Comments

Author: Dhruba18 Jul 2021 Member Level: Gold   Points : 4

Yes, the concept of demand is a very important topic for examination purposes. I want to add a bit more to the answer to FAQ 1, change in demand and change in quantity demanded, because it is very important.

This is the general law of demand that when the price of goods and services increases, the demand decrease and vice-versa. In other words, due to changes in prices of goods, the related changing of demand is known as the change in quantity demanded. In this scenario, the demand curve remains the same. But the change in demand refers to the changes of quantity demanded other than changes in price. In this situation, the demand curve shifts to the right or left from the existing level. This happens due to the income level changes of the consumers, price changes of substitutes or related goods, changes of habits of consumers and the numbers of consumers etc.

Author: Umesh09 Aug 2022 Member Level: Platinum   Points : 8

Genuine demand can only be there when people can afford it. Another thing that is also important is that there are some items which are consumable in nature and it is obvious that they will have a continuous demand while many items that work for a long time will have a subdued demand. This is the scenario that existed in the market so far for a long time but now some new dimensions are getting added to it. Once the consumer's earnings increase then he starts yearning for items which he never thought to be necessary and was leading a simple life. The manufacturers have noticed this behaviour of the consumer and they are now trying to bring some product which has a smaller life than that of the earlier versions. That is very interesting business line for the companies because the consumer who can afford will go for the new version once the old is of no use as per its shorter life. Let us take an example of smartphone. The battery of a smartphone goes for hardly 3-4 years and most of the manufacturers are not supporting this item and people are buying from the duplicate or second hand market and not getting a genuine product and if they had got the battery the smartphone would had worked for a few years more. This is mainly happening in the electronic products and companies are taking advantage of this thing by selling the new models and it is no surprise that people who can afford are changing their smartphone in about 2 years time. Similarly there are fashion and other modern compulsion that people are throwing away the old garments much earlier than their usable life and going for the new ones. This is increasing the business turnover across the globe though it is limited to the people who can afford that type of spending. So we have to visualise the true demand considering these modern day factors also.



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