DEMAND

INTRODUCTION  

Objective of business may be different but their basic business activity is the same. They all produce or buy and sell goods and services that are in demand. Demand is in fact the basic of all productive activities. Just as necessity is the mother of invention, demand is the mother of production. Increasing demand for a product offers a high business prospects in future and decreasing demand for a product reduces the business prospect for example increasing demand of computers, cars and mobile phones in India has enlarged the business prospect for both domestic and foreign companies. On the other hand, decreasing demand for black and white Television  sets and manual type writers is forcing the companies to switch over to modern substitutes or go out of business.    

MEANING OF DEMAND

Conceptually, the term demand implies a desire for a commodity backed by the ability and willingness to pay for it. Unless a person has adequate purchasing power or resources and the preparedness to spend his resources, his desire for   commodity would not be considered as his demand. For example if a man wants to buy a car but he does not have sufficient money to pay for it, it is referred to merely as want and not demand.   

Demand refers to a schedule of qualities of good that will be bought per unit of time at various prices, other things are constant.

Demand is the relationship between the various possible prices of a product and the amount of it that consumers are willing and able to buy during some time period other things being equal.

 

EFFECTIVE DEMAND

 The desire without adequate purchasing power and willingness to pay do not affect the market nor do they generate production activity. A want with these attributes –desire to buy, willingness to pay and ability to pay-becomes effective demand. Therefore the term effective demand can be said to be the desire backed up with the willingness and ability to pay.

THE LAW OF DEMAND

The law of demand is one of the fundamental laws of economics. The law states that the demand for a commodity increases when its price decreases and falls when its prices rises. Other things remaining constant. This is an empirical law that is a law based on observed facts and can be verified. As the law states, there is an inverse relationship between the price and quantity demanded. The law holds under the condition that everything other things is constant. These other things include other determinants of demand such as consumer income, price of substitutes and complement, tastes and preferences of consumer etc. remain constant only in the short run. Also this law of when price goes up quantity demanded reduces holds when something besides price may change.