Types or Kinds of Demand

Types or Kinds of Demand

Demand can be broadly classified into different types, which are explained as follows:

A. Direct demand: 

The demand for an ultimate object is called direct demand. In other words, direct demand refers to the demand for a commodity that is directly consumed to satisfy human wants. For example, demand for bread, butter, fruits, etc. Direct demand for a commodity can be further classified into price demand, income demand, and cross demand.

1. Price demand: 

Price demand refers to the various quantities of a commodity or services that a consumer would purchase at a given time period in a market at various prices. It expresses the relationship between price and quantity demanded. There would be higher demand at a lower price and lower demand at a higher price, other things, remaining the same. Consumer's income, his tastes and preferences price of related goods, etc. are the other things.

2. Income demand: 

Income demand expresses the relationship between income and demand for a commodity. It refers to the various quantities of goods and services, which would be purchased by a consumer at various levels of income in a given period of time, other things being equal. Other things are the prices of the related goods, taste, and preferences of the consumer, price of the same good, etc. The demand for normal goods increases with the rise in income and vice-versa. But in the case of inferior goods, there is an inverse relationship between income and demand. In such a case, as income increases, demand decreases and vice-versa.

3. Cross demand: 

Cross demand expresses the relationship between the demand for one good, say X, and the price of the related good, say Y. It refers to the various quantities of a good, which will be purchased with reference to the change in the price of other related goods. There are two types of related goods: substitute and complementary.

i. Substitute goods: Those goods are substitute goods, which are used in place of each other, for example, tea and coffee. If the price of tea increases, the demand for coffee will rise, and vice-versa, the price of coffee remains the same.

ii. Complementary goods: Those goods are complementary goods, which are jointly used to satisfy a want, for example, pen and ink In such case, the rise in the price of a pen will bring a fall in the demand for ink. Conversely, a fall in the price of pens will increase the demand for ink.

B. Indirect demand or derived demand: 

The demand for factors of production, which go to make the final product is called indirect or derived demand because they help in the production of a commodity, which is directly demanded by the consumer in the market. For example, the demand for brick, cement, iron, wood, labor, etc. to construct a building, is a derived demand.

C. Joint demand: 

When several things are demanded for a joint purpose, it is a case of joint demand. In other words, the demand for complementary goods is joint demand because complementary goods are demanded jointly to satisfy a want. For example, the demand for cars and petrol, pen and ink, etc.

D. Composite demand: 

When a good is demanded for several uses, it is called composite demand. For example, the demand for electricity is composite demand because it has several uses like heating, cooling, lighting, cooking, etc.

E. Competitive Demand: 

This type of demand exists when goods are close substitutes for each other. Ceteris paribus, when the price of NTC services rises, people will shift towards Ncell services. The demand for NTC and Ncell mobile is called competitive demand.

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