Classification of Demand
1. Individual demand:-
A commodity or good demanded by a single person is called individual demand.
2. Market Demand
A demand for a particular product by all customers and added, is called market demand. (Total all individual demand is called as the market demand)
Table is the market demand schedule. This schedule, from the angle of simplification, is based on the assumption that there are two buyers, A and B for X commodity. By adding up their individual demand, the market demand schedule has been estimated:
Factors affecting market demand
Market or aggregate demand is the summation of individual demand curves. In addition to the factors which can affect individual demand.
Prices of products are goods.
Distribution of income and wealth in the community.
Community common habits.
General standard of living and spending habits of people.
Age structure and sex ration of population.
Level of taxes imposed on the good. (Imposition of high level of tax leads to increase in price which leads to fall in demand.)
Inventions and innovations. (When a new product is launched with new feature in the marker it general has high demand).
Fashions of people. (eg:- bikes are latest fashion and more demanded then the scooters which are old fashion.)
Climatic or weather conditions. (Cool drinks have much demand in summer rather then in winter.)
Customs of people (during the time of festivals the demand for clothes and sweets will be high).
Advertisement and sales propaganda. (Good advertisement gives raise to sale of goods).
3. Derived demand
The increase in demand for one particular good causes increase in the demand for other good is called derived demand. Complementary goods are those goods which are jointly used to satisfy a want. In other words, complementary goods are those which are incomplete without each other.
These are things that go together, often used simultaneously. For example, pen and ink, Tennis rackets and tennis balls, cameras and film, etc.
For example, demand for coal leads to derived demand for mining, as coal must be mined for coal to be consumed.
Increasing demand for use computers in various fields will cause increase in demand for the operating systems like Microsoft windows products.
Increase in the demand for automobiles like bikes, cars and large & heavy vehicle will cause increase in the demand for the fuel like petrol and diesel.
Increase in the demand for the cellular phone will cause increase in the demand for the memory cards for the multimedia purpose.
Increase in the demand for the education will cause increase in the demand for the text books for the various subjects.
4. Cross Demand:
When the demand of one commodity is related with the price of other commodity is called cross demand. The commodity may be substitute or complementary. Substitute goods are those goods which can be used in case of each other. For example, tea and coffee, Coca-cola and Pepsi. In such case demand and price are positively related. This means if the price of one increased then the demand for other also increases and vise versa.
Cross elasticity demand:
There is a mutual relationship between change in price and quantity demanded of two related goods. Change in the price of one goods can cause change in the demand for the related good. For example, change in the price of tea ordinarily causes change in demand for coffee. Likewise, change in the price of cars causes change in demand for petrol. Mutual relationship between quantity demanded of a good due to change in the price of another goods can be measured by cross elasticity of demand.
Change in the Price of a particular good effect the demand for the other good. For example, 10% increase in the price of fuel, that causes 20% decrease in the demand for new cars which are not giving mileage,This measures the % change in QD for a good after the change in price of another.
In the words of Ferguson, 'The cross elasticity of demand is the proportional change in the quantity demanded of good X divided by the proportional change in the price of the good Y"
According to Liebhafsky,' The cross elasticity of demand is a measure of the responsiveness of purchases of X to change in the price of Y "