Demand

The analysis of demand is very important in economic theory. Demand for a commodity along with the supply determines the equilibrium price of a commodity in the market. Here we will analyse demand and the law of demand, supply and the law of supply will be discussed in the next chapter. In the Chapter-II, we will bring both demand and supply together to know how the equilibrium price is determined under perfect competition.

• Demand for a commodity

Before discussing the law of demand, it is very important to understand the meaning and definition of demand. To a common man, demand means desire for a commodity. But mere desire for a commodity is not demand in economics. It is the ‘effective desire’ for a commodity which can be called as demands. ‘Effective desire’ has two important characteristics, viz. (i) ability to pay for the commodity and (ii) willingness to pay for the commodity. If the consumer has no monetary ability to pay for the commodity, then desire cannot be demand. A beggar’s desire for a horse is not demand because he does not have the ability to pay for the horse. Again if the consumer has the ability but does not have the willingness to part with the money, want to part with the money, then his desire cannot be demand. Thus if the consumer has the willingness and ability to pay for the commodity, then his desire can be transformed in demands.