Demand in economics means the quantity of a good or service that consumers are willing and able to buy at different prices in a given period of time. It is not just a desire to buy, but desire backed by the ability to pay and a specific price and time frame.

Meaning of Demand (Quick Scoop)

You can remember demand with four key ideas:

  • There is a specific good or service (for example, pizza).
  • Consumers are willing to buy it.
  • They are able to pay for it (have income/money).
  • Quantity demanded depends on the price and a time period (per day, per week, per month, etc.).

Economists show demand using a demand curve , which is usually downward sloping: when price falls, quantity demanded rises, and when price rises, quantity demanded falls (law of demand).

Example: If the price of movie tickets falls from 300 to 200, more people go to the cinema that week. The quantity demanded of tickets increases as price falls.

Law of Demand (One Line Intuition)

  • Law of demand : When price increases, quantity demanded usually decreases; when price decreases, quantity demanded usually increases, other things remaining the same.
  • This inverse relationship is why the demand curve slopes downward on a graph.

Determinants of Demand (Main Factors)

Determinants of demand are the factors that cause the demand curve to shift to the right (increase in demand) or left (decrease in demand), at the same price. Below are the common ones normally asked in exams.

1. Price of the Good (Movement along the curve)

  • Change in price of the same good causes movement along the demand curve (extension or contraction of demand), not a shift.
  • Higher price → lower quantity demanded; lower price → higher quantity demanded (law of demand).

2. Consumer Income

  • When income increases , demand for normal goods (better clothes, restaurant food, electronics) usually increases (demand curve shifts right).
  • For inferior goods (very low-quality alternatives), higher income can actually reduce demand, shifting demand left as people switch to better options.

3. Price of Related Goods

Related goods are of two main types:

  • Substitutes : Goods that can replace each other (tea and coffee, butter and margarine).
    • If price of tea rises, demand for coffee may increase because people switch from tea to coffee.
  • Complements : Goods used together (car and petrol, printer and ink).
    • If petrol price rises a lot, demand for cars may fall because using a car becomes more expensive overall.

So, change in price of related goods shifts the demand curve for the original good.

4. Tastes and Preferences

  • Changes in fashion, habits, trends, health awareness, and advertising can increase or decrease demand.
  • If a product becomes trendy or is seen as healthier/more desirable, demand increases even at the same price (rightward shift).
  • If it falls out of fashion or gets negative publicity, demand falls (leftward shift).

5. Expectations of Future Prices and Income

  • If consumers expect prices to rise in the future , they may buy more now (current demand increases).
  • If they expect a fall in prices, they may delay purchases (current demand decreases).
  • If people expect higher future income , they may start increasing their current consumption as well.

6. Number of Buyers (Population)

  • When the number of consumers in the market increases (population growth, opening of new markets), market demand increases.
  • If the number of buyers falls (migration, demographic change), market demand decreases.

7. Government Policy, Taxes, and Other Factors (often grouped)

Some sources also include these additional determinants:

  • Taxes and subsidies :
    • Higher indirect taxes (like GST/VAT) on a product can reduce demand.
    • Subsidies can make goods cheaper and increase demand.
  • Season and climate :
    • Seasonal products such as woollen clothes in winter, cold drinks in summer, have demand that depends heavily on weather and season.
  • Advertising and marketing intensity :
    • Strong advertising can increase awareness and preference, leading to higher demand at the same price.

Simple Exam-Style Summary

You can write your answer like this in an exam:

  1. Definition of demand
    Demand is the quantity of a good or service that consumers are willing and able to purchase at various prices in a given period of time.
  1. Law of demand
    Other things remaining constant, when the price of a good rises, its quantity demanded falls, and when price falls, its quantity demanded rises.
  1. Determinants of demand (any 5–7 well explained points):
    • Consumer income
    • Price of related goods (substitutes and complements)
    • Tastes and preferences
    • Expectations about future prices and income
    • Number of buyers (population)
    • Government policy, taxes and subsidies
    • Seasonal factors and advertising

Each point should briefly explain how that factor increases or decreases demand. Information gathered from public forums or data available on the internet and portrayed here.