QUESTION 1. WHAT IS DEMAND 2. TYPES OF DEMAND 3. LAW OF DEMAND. SOLUTION Definition: Demand my be defined as the amount or quantity of goods or services which a consumer is willing and able to buy at a given price and at a particular time. When a consumer demand is backed up by the necessary ability and willingness to pay, it is said to be effective demand. But if the consumer does not have the ability (means money) to buy the goods, it means he merely wants or desires the goods. Laws of Demand The law of demand stated with the higher the price, the lower the quantity of goods that will be demanded, or the lower the price, the higher the quantity of goods that will be demanded. The law simply explain that when the price of yam, for example, is high in the market, very few quantities of it will be demanded by the consumer and vive versa. All things being equal, this law will hold under the following assumptions: i. That there will be no change in taste and preference of the consumer. ii. That the consumers income remains constant. iii. That no very close substitutes of the commodity exist. iv. That the habit of consumers remains unchanged. v. That there is no change in the quantity of the product. Demand Scheduled Demand scheduled is a table showing the relationship between the price and quantity of the commodity demanded. This table obeys the law of demand. Price (N) Quantity demanded (kg) 1. 100 10 2. 80 20 3. 60 30 4. 40 40 5. 20 50 Demand Curves A demand curve is a graph showing the relationship between price and quantity of that commodity demanded. The curve is derived from demand scheduled 100 Price(N) 80 Demand curves 60 40 20 0 10 20 30 40 50 Quantity demanded (kg) FACTORS AFFECTING DEMAND Factors which affect the demands for any good include the following 1. Price: - The higher the price of any good, the lower the quantity that will be demanded. 2. The prices of other commodities: - This applies to commodities that have close substitutes. 3. Income of the consumer: - The higher the income of a consumer, the higher the quantity of commodity that will be demanded. 4. Changes in Taste of consumer: - If consumers change their taste for a particular commodity, the demand for that commodity will also change 5. Population: - Increase in population will lead to high demand for commodities. 6. Periods of festivals:- People demand for more of specific commodities during certain festivals. 7. Expectation of changes in prices : - If people expect that there will be high prices of goods in the future, demand will increase and vice versa. 8. Taxation: - An increase in taxation means a reduct in purchasing power which may result in decrease in the demand for certain goods. 9. Elasticity of demand: Elasticity of demand is define as the degree of responsiveness of demand to little change in price Elasticity = percentage change in demand Percentage change in price PRICE ELASTICITY OF DEMAND Price elasticity of demand refers to the degree of responsiveness of demand to little changes in price of goods and services Types of Elasticity of demand 1. Unity Elasticity of demand: Elasticity of demand is said to be at unity if a change in price leads to equal change in demand. Elasticity is equal to one, i.e., E = 1 2. Inelastic demand: When a change in price of commodities leads to little or n change in demand is said to be inelastic. Elasticity is less than one, i.e. E1 4. zero elasticity of demand, demand in this case remain unchanged no matter the change in this case is also perfectly inelastic 5. Perfect elasticity or infinity elasticity of demand : - the consumer react sharply to change in price, the sharp response could be for an increase or decrease in price TYPES OF DEMAND 1. Derived demand: This is a situation in which a commodity is wanted not for its immediate satisfaction of want but because of the demand for another commodity .that is it mean that the demand for one commodity will necessitate the demand for another commodity for instance the demand for goods and service will necessitate the demand for labour. Here labour is wanted not because of its direct satisfaction of wan but to produce goods and services. 2. Joint or complementary demand: When two or more commodities are wanted to satisfy a want in place of another similar commodity. This is to satisfy one want at the same time it is called joint or complementary demand. Example are bed, mattress, pillow and bedding are wanted to satisfy one want. Motor car and petrol, trouser and shirt, exercise book and pen, e.t.c. these commodities are put together in order to satisfy one want or the other. They play complementary roles i.e. they help each other in order to complete a demand. 3. Competitive demand: Demand is said o be competitive. When a commodity is wanted to satisfy a want in place of another similar commodity. This applies to commodities that have close substitutes. For instance, if the price of star beer is high, people may change to harp beer which performs the same function. Other commodities that may be competitively demand are that, omo, elephant, detergents butter and margarine e.t.c if the price of any of these commodities is high, the consumer may switch over the close substitute which price is low. 4. Composite demand: Demand is said to be composite when a commodity I wanted to satisfy different wants. For instance, palm oil may be demanded for cooking food, manufacturing of soap and pomade. E.t.c. Therefore, palm oil may be wanted because of the various purpose it wikll serve. REFERENCES • Iwena O.A (2000), essential Agricultural science, Tghird Edition, Tonad Publisher limited • Omotosho O. (2001) Exam focus Geography university press plc.
Posted on: Mon, 01 Jul 2013 10:47:17 +0000
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