What is Demand?

Let’s assume : You go to a grocery store to buy rice. You require 3 kg rice. On reaching the store, You realize that there is an offer provided by the store on some other brand of rice (Introductory offer). The offer is that on 5kg rice, you will be getting 1 kg of rice free. What will you do?

  • Buy 3 kg that you wanted of the regular brand that you use
  • Buy 5 + 1 i.e., 6kg at the price of 5Kg of the new brand rice available at the store.

Here, we understand one thing very clearly that when the price of the product is falling, the demand is increasing. Whether it is a real demand or not. In this case, the real demand is 3 Kg but because of the offer, our demand increased.

Therefore, the demand of a particular product is defined as the quantity of that product which a customer is willing to buy at a particular price, at a particular time in a particular market.

Determinants of Demand:

Determinants are those factors that affect the demand of a product. From the above example, following determinants of Demand are clear:

  1. Price of the Product:

In the above case, we have clearly understood that when the price of the product decreases, the demand of that product increases.

  1. Tastes and preferences of the customers:

In the above case, if you do not wish to experiment with the new brand of rice, you will stick to buying your regular brand at the same price and the demand will remain the same.

  1. Price of the Related products (Substitute or Complimentary):

We have two competitive brands here. One is a regular brand with no offer but the other one is a new brand with an offer. If you are not very brand loyal and wish to experiment the new brand rice which is giving an offer, you will end up buying the new brand. What actually happened here? The demand of the regular brand decreased irrespective of the fact that its price didn’t change and the demand of the new brand increased.

  1. Income of the Buyer:

You very much want to buy the 5 + 1 kg offer of rice but do not have enough money to buy the same as you only have money to buy 3kg rice. Thus, even if the price of a product decreases and other things are favorable, if you do not have disposable income, your demand of that product will not increase.

  1. Geographic location of the market:

Let’s assume that the offer given on the rice is only available at one particular store in the city and in no other store. Therefore, the demand of new rice brand will be higher at the store giving the introductory offer.


Function of Demand:

Function of Demand is defined as the relation between demand of a product and its determinants. Demand of a product is symbolized as “qD”. The Demand function is symbolized as:

qD = f (P, T, Pr, I, L ……….)


qD = quantity demanded of a product

P = price of the product

T = Tastes and preferences of the customers

Pr = Price of the Related products (Substitute or Complimentary)

I = Income of the Buyer

L = Geographic location of the market