LET ME INTRODUCE

THE TYPES OF DEMAND

ALYSA TOLENTINO
DIRECT AND DERIVED DEMANDS:
• Direct demand refer to
demand for goods meant for
final consumption, it is the
demand for consumer’s goods
like food items readymade
garments and houses.
(ex. Fast foods clothes shoes)
• Derived demand is the vice versa of direct
it is the demand for producers goods like
industrial raw materials, machine tools and
equipment’s.
• Derived demand happens when the
demand for a resource or intermediate
good is determined by the demand for the
final good.
• The chain of derived demand consists of
three elements – raw materials, processed
materials, and labor; higher demand for
the final product will trickle down the
chain.
• The two types of derived demands are
direct and indirect.
EXAMPLE:
DOMESTIC AND INDUSTRIAL
DEMANDS:
• Domestic and industrial demand: The distinction between
domestic and industrial demand is very important from the
pricing and distribution point of view of a product. For
instance, the price of water, electricity, coal etc. is deliberately
kept low for domestic use as compared to their price for
industrial use.
AUTONOMOUS AND INDUCED
DEMAND:

The demand for complementary goods such as bread and butter, pen and
ink, tea, sugar milk illustrate the case of induced demand. In case of
induced demand, the demand for a product is dependent on the
demand/purchase of some main product.
There will always be a partner or the complementary goods. Nobody
today consumes just a single commodity, everybody consumes a bundle
of commodities.
PERISHABLE AND DURABLE GOOD’S
DEMANDS:

• Perishable and durable goods demand: Perishable goods are also known as non-durable /single
use goods, while durable goods are also known as non- perishable/ repeated use good’s. Bread,
butter, ice-cream etc. are the fine example of perishable goods, while mobiles and bikes are the
good examples of durable good’s Both ‘consumers’ and ‘producers’ goods perishable
• and non-perishable nature. Perishable goods are used for meeting immediate demand, while
durable goods are meant for current as well as future demand. Durable goods demand is
influenced by the replacement of old products and expansion of stock. Such demand fluctuates
with business conditions, speculation and price expectations. Real wealth effect has strong
influence on demand for consumer durables.
NEW AND REPLACEMENT DEMAND:

• New demand is meant for an addition to stock, while replacement

demand is meant for maintaining the old stock of capital/asset intact.
The demand for spare parts of a machine is a good example of
replacement demand, but the demand for new models of a particular
item [say computer or machine] is a fine example of new demand.
Generally, new demand is of an autonomous type, while there placement
demand is induced one-induced by the quantity and quality of existing
stock. However, such distinction is more of a degree than of kind
 The demand for semi-finished
goods and raw materials is
derived and induced demand as it
is dependent on the demand for
FINAL AND final goods. The demand for final
INTERMEDIATE goods is a direct demand. This
DEMANDS type of distinction is based on
types of goods- final or
intermediate and is often
employed in the context of input-
output models.
 INDIVIDUAL AND MARKET
DEMAND:
INDIVIDUAL DEMAND DESCRIBES THE ABILITY AND
WILLINGNESS OF A SINGLE INDIVIDUAL TO BUY A
S P E C I F I C G O O D O R S E RV I C E . A S I N D I C AT E D A B O V E ,
T H I S L A R G E LY D E P E N D S O N T H E P R I C E O F T H E
PRODUCT AS WELL AS INDIVIDUAL PREFERENCES. IN
MOST CASES (FOR NORMAL GOODS), DEMAND
INCREASES WHEN THE PRICE OF A GOOD OR
S E RV I C E D E C R E A S E S . T H I S R E L AT I O N S H I P B E T W E E N
P R I C E A N D Q U A N T I T Y C A N B E I L L U S T R AT E D U S I N G
A D E M A N D C U RV E
INDIVIDUAL AND MARKET
DEMAND:
• Market demand describes the quantity of a particular good or service that all
consumers in a market are willing and able to buy. In other words, it represents
the sum of all individual demands for a particular good or service. Again, this is
a lot easier to understand if we look at the corresponding demand curve.
THE MARKET AND INDIVIDUAL
DEMAND CURVES:

• Market segmentation is the process
of dividing prospective consumers
into different groups depending on
factors like demographics, behavior
and various characteristics. Market
segmentation helps companies better
understand and market to specific
groups of consumers that have
similar interests, needs and habits.
T O TA L
MARKET AND
SEGMENTED
MARKET
DEMAND:
in each market segment, there are typically
three things that are common to all segments
- homogeneity, distinctiveness and reaction.
In each individual group, the potential
customers are generally homogeneous -
meaning they are generally fairly similar in
terms of their common needs. Additionally,
the members of each individual grouping are
distinct from the other groups - or, they are
different in some ways than customers in
other groupings. Lastly, consumers in each
group have similar (or relatively similar)
reactions to various marketing, advertising
and products directed at their segment, and
tend to perceive the full value of products
differently than others in different groups.
THE COMPANY AND INDUSTRY
DEMAND:
• Demand is classified into two types, namely, (a) Industry demand and (b) Company demand.
(a) Industry demand means the total or aggregate demand for the products of a particular
industry. For instance the total demand for sugar is fulfilled by the sugar industry. The various
sugar mills in sugar industry produce such quantity of sugar which can be demanded by the
people at a particular time.
• (b) Company demand refers to the demand for the products of a particular company in an
industry. An industry consists of different companies producing a commodity with different
brand names and trade marks. For instance, the soap industry consists of several soaps
manufactured by different companies Unilever Limited, Godrej etc. are some of the leading
companies which manufacture different varieties of soaps. Industry demand consists of the
aggregate demand made for the product of different companies.
• Industry covers all the firms or companies which produce close substitutes for a single product
with different brand names.
SLIDE TITE
DEMAND FUNCTION AND
DEMAND CURVE:
• Demand curve is a relation between the price and the quantity demanded of a good. The main
point of this relation is that, “other things” remaining the same, if the price of a good increases
or decreases, then its quantity demanded decreases or increases, respectively. This relation is
known as the law of demand.
• The main thing about the demand function, on the other hand, is that demand for a good, apart
from depending on its own price, depends on “other things” as well, income of the buyers,
prices of substitute and complemen­tary goods, the tastes and habits of the buy­ers, number of
buyers, etc. The influence of these “other things” on the demand for a good is also very
important.
• Demand curve is a relation between the price and the quantity demanded of the good. This curve
tells us what the qd would be at any particular price.

• The demand function, on the other hand, represents a more general relation between not only the
(own) price and demand for the good (along a particular demand curve), but also between the
other demand determinants and the demand for the good.

• It gives how the demand curve itself would change its position, i.e., how it would shift, if any of
the “other” demand determinants,. income, changes. While a demand curve is a particular curve,
the demand function gives rise to a number of demand curves to which the initial demand curve
may shift as a consequence of a change in any of the demand determinants other than the own
price of the good.

• Thus, the scope of the demand function is much more wide than that of the demand curve.
• Demand curve formula
• The demand curve shows the amount of goods consumers are willing to buy at each market price.

• A linear demand curve can be plotted using the following equation.

• Qd = a – b(P)

• Q = quantity demand
• a = all factors affecting price other than price (e.g. income, fashion)
• b = slope of the demand curve
• P = Price of the good.
• Inverse demand equation
• The inverse demand equation can also be written as

• P = a -b(Q)
• a = intercept where price is 0
• b = slope of demand curve
In this case, a has increased from
40 to 50.

This means that for the same price,

demand is greater. It reflects a shift
in the demand curve to the right.
This could be due to a rise in
consumer income which enables
them to buy more goods at each
price.
• The demand curve can also be written algebraically. The convention is for the demand curve to
be written as quantity demanded as a function of price. The inverse demand curve, on the other
hand, is the price as a function of quantity demanded.
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