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Unit 2: Market Demand

The average price at the individual auctions dropped to 1,220 from 1,282 over the last Notes
week of January 2011 at the KCPMC auction, he said.
Severe cold wave conditions in the north Indian states coupled with unconfirmed reports
of arrival of Guatemalan cardamom in the upcountry markets led to a slow down in
buying activities.
The market will improve from the first week of February, 2011 as the wedding season in
north India is to begin, traders said. At the same time, arrivals also declined to about one-
third of it during the peak time of the season. Besides, the quality of material arriving at
the market is also inferior which the trade attributed to holding back by growers hoping
the prices would move up in the coming days, they said.

Source: www.thehindubusinessline.com

2.2 Summary

In economics demand has a specific meaning. Demand for any commodity implies: desire
to acquire it, willingness to pay for it, ability to pay for it and at a particular time.
Demand depends on not only the price of a commodity, but also income, price of related
goods – both substitutes and complements – taste of consumer, price expectation and all
other factors.
According to Law of Demand, there is an inverse relationship between the price of a
commodity and the quantity demanded (other things remaining equal)
2.3 Keywords

Demand Function: A comprehensive formulation which specifies the factors that influence the
demand for the product
Demand: The quantity of the commodity which an individual is willing to purchase per unit of
price at a particular time.
Derived Demand: Goods whose demand is tied with the demand for some other goods
Direct Demand: Goods whose demand is not tied with the demand for some other goods

2.4 Self Assessment

1. State true or false for the following statements:
(a) Demand of petrol is direct demand.
(b) Demand is just a want or desire to purchase a product or a service.
(c) Demand for labour is always a derived demand.
(d) When price of tea goes up, then the demand for coffee is likely to go up as well.

(e) When the price of X brand of soap went up, people began buying Z brand of soap.
This happened due to the substitution effect.
(f) When the price of bread goes up, the demand for butter usually goes up.
2. Fill in the blanks:

(a) Usually, income of the individuals and demand have a ……………. relationship.
(b) Demand for machinery in industries is a ………………demand.

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