Types of demand in detail. Demand is the quantity of a particular good or service that consumers are willing and able to buy at a given price and time. It\’s the relationship between the price of a product or service and the amount of that product or service that people are willing to buy. The law of demand states that all other things being equal, as the price of a product increases, the quantity demanded of that product will decrease. Conversely, as the price of a product decreases, the quantity demanded of that product will increase.
Demand is influenced by various factors such as the price of the product or service, consumer income, consumer preferences, availability of substitute goods or services, and market trends. Understanding demand is essential for businesses to set their pricing strategies, determine production levels, and forecast sales. It\’s also important for policymakers to make decisions related to taxation, subsidies, and regulations.
TYPES OF DEMAND. Sure, here\’s a more detailed explanation of the different types of demand:
- Price demand: Price demand is the quantity of a product or service that consumers are willing to purchase at a particular price. It\’s often measured using a demand curve, which shows the relationship between the price of a product and the quantity demanded by consumers. Generally, as the price of a product increases, the quantity demanded by consumers decreases, and vice versa.
- Income demand: Income demand is the quantity of a product or service that consumers are willing to purchase based on their level of income. Generally, as consumers\’ incomes increase, their demand for goods and services also increases. This is because they have more disposable income to spend on goods and services.
- Cross demand: Cross demand is the quantity of a product or service that consumers are willing to purchase based on the price of a related product or service. For example, if the price of gasoline increases, consumers may purchase fewer SUVs and instead opt for more fuel-efficient cars.
- Seasonal demand: Seasonal demand is the quantity of a product or service that consumers are willing to purchase during a specific season or time period. For example, demand for sunscreen typically increases during the summer months.
- Brand demand: Brand demand is the quantity of a product or service that consumers are willing to purchase based on the brand name. Consumers may be willing to pay a premium price for a product or service that they perceive to be of higher quality or value.
- Complementary demand: Complementary demand is the quantity of a product or service that consumers are willing to purchase along with another product or service. For example, the demand for bread may be complementary to the demand for butter.
- Joint demand: Joint demand is the quantity of two or more products or services that are demanded together, as they are complementary to each other. For example, the demand for printer cartridges is joint with the demand for printers, as one cannot function without the others
types of demand explained
- Derived Demand: Derived demand is the type of demand which occurs as a result of demand for other commodities. The demand for one commodity will necessitate the demand for another commodity
- For example, flour and sugar are demanded because there is a demand for bread. Labour is demanded to construct the highway because there is a demand for good roads. So, labour, flour and sugar are “derived” demand commodities
- Joint or complementary demand: This types of demand is a demand which occurs when two commodities that are related to each other are demanded at the same time.
- These two commodities are said to be complementary to each other as a change in the demand for one commodity will bring about a similar change in the demand for the other.
- Examples of joint types of demand are bread and butter, tea and milk, and car and petrol. Sometimes they are described as “joint demand goods”
- Competitive types of demand: When two commodities are fairly close substitutes to each other, they are in competitive demand. In other words, they serve the same purpose or perform a similar function such that an increase in the demand for one will result in a fall in the demand for the other.
Examples of commodities that are close substitutes are Boumvita and Milo, Malta Guinness and Maltina, Ariel and Elephant detergents, butter and margarine. If the price of any of these pairs of commodities is high, the consumers switch over to the other close substitute which has a lower price.
- Composite demand: this types of Demand is said to be composite when a commodity is required to serve two or more purposes. For example, sugar is widely used in the home for beverages as well as in industries for making pastries and confectionery. If the industrial demand for sugar suddenly increases, it will affect the quantity of sugar demanded in the home.
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