Demand for a commodity is the desire to buy a commodity backed with sufficient purchasing power and the willingness too spend. Quantity demanded refers to a specific quantity to be purchased against a specific price of the commodity.
Demand curve is a graphic presentation of demand schedule, a table showing different quantities of commodity against different possible prices.The curve shows that how quantity demanded of commodity is related to its own prices. The slope of demand curve is estimated as (-)change in prices/ change in quantity. It shows the ratio between price and quantity change. Negative sign indicates the inverse relationship between price and quantity demanded of a commodity.
Demand Function or Determinants of demand: a) Individual demand function shows how demand for a commodity by the individual consumers in the market is related to various determinants.
1) Own price of commodity- other things remaining constant, with rise in own price of the commodity, its demand contacts and vice-versa. This relationship between own price and its demand is called LAW OF DEMAND.
2) Price of related goods- Goods can be divided into Substitute goods which can be interchanged for use, eg- tea and coffee. When price of substitute good increase, demand for that particular good rises. Next complementary goods which complete the demand for each other, eg. pen and ink. When price of complementary good increases, demand for given good falls and vice-versa.
3) Income of consumer- The demand for normal goods tends to increase with increase in income, and vice-versa.On the other hand demand for inferior goods tends to decrease with increase in income.
4) Taste and preferences- They are influenced by change in fashion, climate, innovations, etc. if taste and preferences for product is fading its demand will decrease.
5) Expectations- If the consumer fears acute shortage of commodity in future, he may raise his present demand for commodity at its existing price.
b) Market demand function- The determinants of this function is similar to above with two addition: i) population size or no. of buyers- demand increase with increase in no. of buyers for the commodity.
ii) Distribution of income- Distribution of income between rich and poor also influence the spending in normal and inferior goods.