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Types of Demand
Types of Demand
Types of Demand
TYPES OF DEMAND The demand for various kinds of goods is generally classified on the basis of kinds of consumers, suppliers of goods, nature of goods, duration of consumption goods, interdependence of demand, period of demand and nature of use of goods (intermediate or final), The major classifications of demand are as follows: Individual and market demand Demand for firm's prodtictand industry's products Autonomous and derived demand Demand for durable and non-durable goods Short-term and long-term demand Individual and Market Demand The quantity of a product, which an individual is willing to buy at a particular price during a specific time period, given his money income, his taste, and prices of other commodities (particularly substitutes and complements), is called 'individual's demand for a product'. The total quantity, which all comsumers are willing to buy at a given price per time unit, given their money income, taste, and prices of other commodities is known as 'market demand for the good'. In other words, the market demand for a good is the sum of the individual demands of all the c6-nsumers of a product, over a time period at given prices.
Demand for Firm's Product and Industry's Products The quantity of a firm's yield, that can be disposed of at a given price over a period refers to the demand for firm's product. The aggregate demand for the product of all firms of an industry is known as the market-demand or demand for industry's product. This distinction between the two kinds of demand is not of much use in S.P.Ponsudha AP/IT CAPE
obsolescence of machinery, etg. For example, let us suppose that the annual demand for cigarettes in a city is 10 million packets and it increases at the rate of half-a-million packets per annum on account of increase in population when other factors remain constant. Thus, the total demand for cigarettes in the next year will be 10.5 million packets and 11 million packets in the next to next year and so on. This is a linear increase in the demand for a non-durable good like cigarette. Now consider the demand for a durable good, e.g., automobiles. Let us suppose: (i1 the existing number of automobiles in a city, in a year is 10,000, (ii) the annual replacement demand equals 10 per cent of the total demand, and (iii) the annual autonomous increase in demand is 1000 automobiles. As such, the total annual clemand for automobiles in four subsequent years is calculated and presented in Table 2.1. Table 2.1: Annual Demand for Automobiles Beginning Total no. of Replacement Annual Total Annual of the year automobiles demand autonomous demand increase (Stock) demand in ; , demand 1st year 10,000 10,000 2nd year -3id year 4th year 10,000 12,000 14,200 1000 1200 1420 1000 1000 1000 12,000 _ 14,200 16,620 2000 2200 2420
Stock + Replacement + Autonomous demand = TotalDemand It may be seen from the Table 2.1 that the total demand for automobiles is increasing at an increasing rate due to acceleration in the replacement demand. Another factor, which might accelerate the demand for automobiles and such durable goods, is the rate of obsolescence of this category of goods.