question_answer

Define demand. Explain the factors influencing individual household demand for a commodity in the market.                                                 

Answer:

Demand means the quantity of a commodity that consumers wish to purchase in the market in a given period of time and at various prices.                                     Factors affecting individual household demand are explained below:                          (i) Own Price of a Commodity When the price of a commodity rises in the market, its demand contracts and with a fall in price, its demand expands.                                              (ii) Price of Related Goods Demand for a commodity is also influenced by change in price of related goods. These are of two types: Substitute Goods These are the goods which can be substituted for each other, such as tea and coffee or ball pen and ink pen. In case of such goods, increase in the price of one, causes increase in demand for the other and decrease in the price of one, causes decrease in the demand for the other. (b)Complementary Goods These goods complete the demand for each other and are therefore, demanded together. Pen and ink, bread and butter, car and petrol, etc ma y be cited as examples. In case of complementary goods, a fall in the price of one, causes increase in the demand for the other and a rise in the price of one, causes decrease in the demand for the other. (iii) Income of the Consumer Change in the income of the consumer also influences his demand for different goods. The demand for normal goods tends to increase with increase in income and vice-versa. On the other hand, the demand for inferior goods like coarse grain, etc. tends to decrease with increase in income and vice-versa. (iv) Tastes and Preferences The demand for goods and services also depends on individual tastes and preferences. These terms are used in a broad sense. If there is a favourable change in tastes and preferences, demand increases and unfavourable change leads to decrease the demand. (v) Expectations If the consumer expects a significant change in the availability of the concerned commodity in the near future, he may decide to change his present demand for the commodity. Particularly, if the consumer fears acute shortage of the commodity in the near future, he may raise his present demand for the commodity at its existing price.