Economics: Demand: Individual Demand Schedule and Law of Demand

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Individual Demand Schedule

Every individual demands some goods and services for the satisfaction of his/her wants. In the example given earlier we talked about Varsha’s demand for rice, dal, wheat flour and mangoes for a week. Varsha’s purchases will not stop there. She will again purchase these items whenever she needs them. Whether she will buy the same quantity or not next time when she goes to the market depends on whether the price of the goods have remained same or not. Let us only consider the purchase of any one commodity, say mangoes by her in order to analyze the demand of one commodity by her over time. Let us also think that prices of other items, money in Varsha’s pocket and her taste have not changed. After observing Varsha’s purchases of mangoes over time we noticed the following.

Varsha’s demand for mangoes

 Price of mangoes(Rs per Kg) Quantity demanded of mangoesper week (in Kg) 80 0.5 70 1.0 60 1.5 50 2.0 40 2.5 30 3.0

The above table shows different quantities of mangoes demanded at different prices by Varsha per week. Such a tabular presentation of different quantities of a commodity demanded at different prices is called an individual demand schedule. Demand for a commodity by an individual buyer is called individual demand. Individual demand is the quantity of a commodity that an individual buyer is willing to buy at given price per unit of time.

Law of Demand

• The law of demand gives the relationship between price of a commodity and its quantity demanded when all factors other than price of the commodity remain unchanged.

• The law of demand is given as, “If price of a commodity falls, its quantity demanded increases and if price of the commodity rises, its quantity demanded falls, other things remaining constant.”

• The law of demand means that, other factors determining the demand remaining constant, price of a commodity and its quantity demanded are inversely related.

Shape of Individual Demand Curve

According to the law of demand, when all other factors determining demand remain constant, the buyer buys more quantity of a commodity at lower price and less of it at a higher price. Due to this inverse relationship between price and quantity demanded, the demand curve slopes downwards from left to right.

The most important reasons for the inverse relationship between price and quantity demanded are explained below.

• When more and more units of a commodity are consumed, satisfaction derived from successive units of the commodity goes on diminishing. The law of demand also provides the same information which will lead to downward slope of demand curve.

• A buyer can buy more quantity of a commodity when its price falls and less of it when its price raises leading to the downward slope of the demand curve.

• When price of a commodity falls, it becomes relatively cheaper than its substitutes (although price of substitutes remains the same). Demand for the commodity will fall when its price rises. It will lead to downward slope of the demand curve.

Market Demand for Product

• The total quantity of a commodity demanded by all the individual buyers in the market at the given price at given time is called market demand of that commodity.

• Let there are only three buyers buying mangoes in the market – Varsha, Vibha and Somya, market demand will be the sum of individual demand schedules of these three buyers.

Market demand for Mangoes

 Price of mangoes(Rs per Kg) Quantity demanded of mangoes per week (in kg) Market demand of mangoes per week (in kg) 80 Varsha Vibha Somya 1.5 0.5 1.0 0 70 1.0 1.5 0.5 3.0 60 1.5 2.0 1.0 4.5 50 2.0 2.5 1.5 6.0 40 2.5 3.0 2.0 7.5 30 3.0 3.5 2.5 9.0
• When price of mangoes is Rs. 80 per Kg, Varsha demands 0.5 Kg of mangoes, Vibha demands 1.0 kg of mangoes and Somya demands no mangoes. Thus, market demand for mangoes at a price of Rs 80 per kg. is 0.5 + 1.0 + 0 = 1.5 kg of mangoes per week. Likewise, market demand for mangoes can be obtained at other prices.

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