Economics

Demand, Law of Demand and Demand Schedule

len Alfred Ajibola - Mon, 09th September, 2019 @ 14:50: PM

Topics in Economics

Demand, Law of Demand and Demand Schedule Concept and Types of Cost Supply Curve, Law of Supply and Elasticity of Supply What is a Black Market, Its advantages and disadvantages Supply curve, Graphical representation of Supply Curve Scale of Preference and Opportunity Cost



Academic Questions in Economics

Please check out our Test Your Knowledge page to see all Questions and Answers

Budget deficit refers to the amount by which _____.

  1. total expenditure exceeds revenue
  2. capital expenditure exceeds revenue
  3. recurrent expenditure exceeds revenue
  4. recurrent expenditure exceeds capital expenditure
  5. capital expenditure exceeds recurrent expenditure
  6. total expenditure exceeds capital and recurrent expenditure

What are infant industries in Economics?

  1. They are industries that are allowed enough time to mature for recognition
  2. They are industries that produce baby foods in addition to mother care products
  3. They are industries that are too young to compete in a thriving society
  4. They are industries that are constantly introducing new products
  5. They are industries that are under a parent company
  6. They are industries located in rural areas

Which of the theory did Malthus became popular for?

  • A. Population may outgrow the means of subsistence
  • B. The people will eventually decide not to have children
  • C. The death rate may become so high that people may not be able to produce
  • D. Migration of people from one place to another may leave the world barren
  • E. All of the above

Demand:

Demand is one of the forces that govern the market system, the other being supply. Another important concept (Price) is usually determined by both forces (Demand and Supply). Everyone is always in demand for something at various points in their everyday life; for instance, you probably had demanded for data by your network provider before you could read this article from the internet.

You can read on the Concept of Cost here

By definition, Demand is the willingness of a person, buyer or consumer to buy a specific quantity of goods or service at a given price and time.

Various professors have given their own version for the definition of demand. Common to their definitions is the ideology that “there is a desire corroborated or supported by the ability and willingness of a buyer to pay for a particular product at a specific price and time”. Below are some of their definitions:

The demand for goods is a schedule of the amounts that buyers would be willing to purchase at all possible prices at any one instant of a time.

Professor Mayers

Demand is the various quantities of goods that would be purchased per time period at different prices in a given market.

Professor Hibdon

The demand for anything, at a given price is the amount of it which will be bought per unit of time at the price.

Professor Benham

From the above definitions, we can therefore conclude that the definition of demand is referenced to three major factors. These are:

  1. Quantity of goods demanded
  2. Price
  3. Time

Please read on Commodity Market here

Note: Demand (sometimes called Effective Demand) isn’t the same as desire, want or need. This is because the desired (wanted or needed) goods and services may not be bought, especially due to the limitation of price and the availability of money at that point in time. Therefore, the ability to pay for a product is what makes demand effective.

Another term that exists is Latent Demand.

This is when the buyer intends to buy goods or services but lacks the purchasing power; and as a result cannot buy the intended goods or services.

Derived demand is a term used when the demand of a product is required because a related product had been purchased.

For instance If product A is related or connected to product B, the demand of product A will likely result to the demand of product B. In this instance, Product A could be mobile phones while product B may be SIM cards.

 

Law of Demand

The demand for a specific product in the market is governed by the Law of Demand.

The Law of demand states that an increase in price will result to a decrease in the demand of a product while a decrease in price will result to an increase in the demand of a product, as far as other factors remains constant.

Note: This above law of demand holds true under the following assumptions:

  • A close substitute for the commodity does not exist
  • The buyer’s income remain constant
  • The taste and preference of the buyer remains the same
  • The habits and attitudes of the customer does not change

Len Academy

The above diagram shows the Law of Demand for Wheat

Note: This Law of Demand remains valid in the sense that; “when given the choice of 2 similar products with the same price (all other factors remain the same/constant)” you will prefer/choose to buy that with a lower price. This is the concept of Ceteris Paribus Assumption.

According to the market structure, the buyers make up the demand side for a product while the seller constitutes the supply side products.

Please read on Supply Curve here

 

Demand Schedule

Demand schedule is a table that shows the relationship between the prices and quantities of commodity demanded.

Note: This table shows the exact number (quantity) of a good or service that will be bought at each price.

Demand Schedule is of two types. These are:

1. Individual Demand Schedule

This table shows the demand a commodity that an individual (consumer) purchased at various prices and at a particular time. The table below shows an Individual Demand Schedule.

Price in Naira (of a tuber of yam)

Quantity Demanded (per week)

500

5

400

10

300

15

200

20

100

25

Notice that when the price of yam was 500 Naira, the consumer demanded 5 quantities; and when the price was 100 Naira, 25 tubers of yam were demanded.

A graphical representation that shows an individual demand schedule is termed Individual Demand Curve.

Len Academy

On the Individual Demand Curve, the quantity demanded is represented on the X-axis while the price of the commodity is represented on the Y-axis.

 

2. Market or Aggregate or Total or Composite Demand Schedule

This is a table that shows the different commodities purchased by all the consumers/customers in the market.

The Market Demand Schedule is the summation of the individual demand schedules. It shows the demand of different customers for a commodity at a particular price.

Consider the table below:

Unit Price of Commodity (Naira)

Quantity Demanded by Consumer A (QA)

Quantity Demanded by Consumer A (QB)

Market Demand (QA +  QB)

50

20

15

35

40

40

30

70

30

60

45

105

20

80

60

140

10

100

75

175

Notice that when the unit price of the commodity was 50 Naira, consumer A demanded 20 quantities while consumer B demanded 15 quantities.

The market demand is the summation of quantity demanded by consumer A and consumer B; and it had a value of 35.

Len Academy

Market or Aggregate or Total or Composite Demand Curve is a graphical representation that shows the Market demand schedule. The X-axis of this graph shows the market demand of a commodity while the Y-axis shows the price of the commodity.

Please read the Elasticity of Supply here


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len

Alfred Ajibola is a Medical Biochemist, a passionate Academician with over 7 years of experience, a Versatile Writer, a Web Developer, a Cisco Certified Network Associate and a Cisco CyberOps Associate.



Amazing facts in Economics


NOTABLE POINTS IN Economics

Scale of Preference can be defined as the list of a person's needs or wants written in an order of importance. 📜✍️

When you have a limited amount of money and could only buy some of the items on your list (the top items on the list); then the remaining items that you didn't buy will be generally considered as your opportunity cost.

Opportunity cost can be defined as the value of the best alternative that a person could have achieved or bought but couldn't achieve after the best choice had been achieved.

Opportunity cost are of two types

  1. Explicit Opportunity Cost
  2. Implicit Opportunity Cost

Please read on scale of Preference, Opportunity cost and the types of Opportunity cost here

Economics isn't just about money. It isn't just about economizing or efficiency or prudence at management. In simple terms, Economics is a science that deals with the study of scarcity and choice.

Economics have 2 main branches. They are

  • Microeconomics
  • Macroeconomics

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