Hi Guys, Welcome to Economics tutorial , Today we shall deal with Meaning and law of demand .In Economics, demand refers to the quantity of a good or service that consumers are willing and able to purchase at various prices over a given period of time.
Demand is not just about the desire to purchase a product, but also the ability to do so, means consumers must have both the willingness and the financial means to buy the product , that means Desire , Want and Demand . Key components of demand include:
1. Price: The amount of money required to purchase a good or service. Demand typically varies with price, as captured by the Law of Demand.
2. Quantity Demanded: The specific amount of a good or service that consumers are willing to buy at a given price.
3. Demand Schedule: A table that lists the quantity demanded at different prices.
4. Demand Curve: A graphical representation of the demand schedule, typically downward-sloping, showing the inverse relationship between price and quantity demanded.
5. Market Demand: The total quantity demanded by all consumers in a market for a particular good or service at various prices.
Factors influencing demand include consumer preferences, income levels, prices of related goods (substitutes and complements), expectations of future prices, and the number of potential buyers in the market.
The Law of Demand is a fundamental principle in economics that describes the relationship between the price of a good or service and the quantity demanded by consumers. Specifically, the law states that, all else being equal, as the price of a good or service decreases, the quantity demanded increases, and conversely, as the price increases, the quantity demanded decreases.
This inverse relationship between price and quantity demanded is due to two main effects:
1. Substitution Effect: As the price of a good decreases, it becomes relatively cheaper compared to substitutes, leading consumers to buy more of the cheaper good instead of other more expensive alternatives.
2. Income Effect: A decrease in the price of a good increases consumers’ real income (their purchasing power), enabling them to buy more of the good.
Graphically, the Law of Demand is represented by a downward-sloping demand curve on a price-quantity graph, where the vertical axis represents the price and the horizontal axis represents the quantity demanded.
There are, however, some exceptions to the Law of Demand, such as Giffen goods and Veblen goods, where the quantity demanded may increase with price due to specific circumstances like perceived value or necessity.
