Economics

Demand: What is Demand? Law of Demand

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

Topics in Economics

Scheme of work for Economics, SS1, First Term Scheme of work for Economics, SS1, Second Term Scheme of Work for Economics, SS1, Third Term Functions of the Wholesaler Advantages and Disadvantages of the Wholesaler Wholesale Market: Who is a Wholesaler? Characteristics of the Wholesaler Retail Market: Who is a Retailer and Examples of Retailers Market: Types of Market Market - What is a Market in Economics? Elasticity of Supply: Types of Supply Elasticity Supply Elasticity: Elasticity of Supply explained Demand Schedule - Types of Demand Schedule Demand: What is Demand? Law of Demand Concept and Types of Cost Supply, Supply Curve and Law 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

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What is Demand?

Demand is one of the forces that govern the market system. The other is supply.

Price is another important factor that is always determined by Demand and Supply.

Please read on Supply, Supply Curve and Law of Supply here.

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 on LEN ACADEMY.

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".

Please read on Demand Schedule and Types of Demand Schedule here.

Below are some definitions of Demand from the perspective of notable Professors:

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 infer that the definition of demand is referenced to three major factors. These are:

  1. Quantity of Goods Demanded
  2. Price
  3. Time

You can read on the Graphical representation of Supply Curve here.

Note: Demand (sometimes called Effective Demand) isn’t the same as desire, want or need. This is true because the desired (which could be wanted or needed) goods and services may not be bought, especially due to the limitation by price and the availability of money at that point in time.

From the above explanation, we can therefore state that effective demand is the ability to pay for a product.

You can read on Scale of Preference and Opportunity Cost here.

Another term that exists is Latent Demand and Derived Demand.

Latent Demand 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.

Think of it as an unaccomplished demand.

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 the above instance, Product A could be mobile phones while product B may be SIM cards.

Please read on the Concept and Types of Cost here.

 

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.

You can read on Production here.

Note: The law of demand holds true under the following assumptions:

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

Below is a graph that shows the Law of Demand for Wheat:

Law of Demand - Len Academy

The Law of Demand remains valid in the sense that:

When given the choice of 2 similar products with the same price; (assuming all other factors remain constant or the same), you will prefer/choose to buy that with a lower price.

This is the concept of Ceteris Paribus Assumption.

Please read on Balance of Payment Deficit and Balance of Payment Surplus here

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

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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.


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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