WHAT IS DEMAND AND WHAT ARE THE TYPES OF DEMAND

 

  Demand is a desire of consumers to purchase goods and services at a particular price during a given period of time. Therefore demand is a willingness and ability to buy goods and services at a given period of time.

Demand = Willingness + Ability

Example1: if you want to buy a car worth $40000 but you have a $10000 budget to buy a car in that case, you are willing to buy a $40000 car but your inability to buy a $40000 car, will not create a demand for a car.

Example 2: if a person is a millionaire and can afford a watch worth $100000(able) but is unwilling to purchase a watch will not create a demand for a watch.

Therefore demand must be backed by a willingness to buy and the ability to pay for goods and services.

TYPES OF DEMAND

The following are the types of demand: 

1) Direct demand: demand for final goods and services is known as direct demand. For example demand for clothes, electronic devices, shoes, etc.

2) Indirect demand: demand for goods for further production is known as indirect demand. For example demand for raw materials. Indirect demand is also known as derived demand.

3) JOINT DEMAND: when demand for two or more goods is jointly demanded together is known as joint demand. For example car and petrol, tv and remote, etc.

4) COMPOSITE DEMAND: composite demand refers to the demand for commodities that have multiple uses. For example water(used for bathing, cooking, drinking, etc).

5) SUBSTITUTE DEMAND: substitute demand refers to the demand for competitive goods, where one competitor's goods can be substituted by another competitor's goods. For example, instead of buying coke one buys Pepsi.