Demand

Individual Demand

Individual demand refers to the quantity of a specific good or service that a single consumer is both willing and able to purchase at various price levels over a given period of time. This relationship between price and quantity demanded is represented by the individual demand curve.

The individual demand curve typically slopes downward, reflecting the law of demand:

• When the price falls, the quantity demanded increases → an expansion of demand.
• When the price rises, the quantity demanded decreases → a contraction of demand.

This downward slope is driven by factors such as diminishing marginal utility and the substitution effect.

Market Demand

Market demand is the total amount of a good or service that all consumers in a particular market are willing and able to purchase at various prices. It is calculated by horizontally summing all individual consumers’ demand curves.

Because market demand reflects the collective behaviour of all buyers, it is typically more stable and predictable than individual demand. The market demand curve also slopes downward, but its shape depends on the number of consumers and the distribution of their preferences.

Conditions (Determinants) of Demand

Demand for a good or service is influenced by a variety of non-price factors known as the conditions of demand. These determinants cause the demand curve itself to shift, unlike price changes, which move the consumer along the curve.

1. Price of the Good or Service

Although price changes do not shift the demand curve, they do cause movements along it:

• Lower prices → higher quantity demanded (expansion).
• Higher prices → lower quantity demanded (contraction).

Price remains the most immediate and direct influence on demand.

2. Consumer Income

Changes in income affect demand differently depending on the type of good:

• Normal goods: Demand rises when income increases; falls when income decreases.
• Inferior goods: Demand falls when income increases; rises when income decreases.

Higher income often increases consumers’ willingness to purchase luxury or higher-quality goods, shifting demand outward.

3. Prices of Related Goods

Demand is also affected by the prices of substitute and complementary goods:

• Substitutes: If the price of a substitute rises (e.g., Pepsi), demand for the original good (e.g., Coca-Cola) increases.
• Complements: If the price of a complementary good rises (e.g., printers), demand for the related good (e.g., ink cartridges) decreases.

These changes cause the demand curve to shift, not just move along it.

4. Consumer Preferences and Tastes

Shifts in fashion, trends, advertising, social influences, or public perception can cause significant changes in demand:

• A product becoming more fashionable → increase in demand.
• Negative publicity or loss of interest → decrease in demand.

Preferences are dynamic and can shift rapidly, especially in markets like technology, clothing, and entertainment.