Main Aspects of Theory of Demand - Essay Example

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The author of this essay "Main Aspects of Theory of Demand" outlines features of this economic theory, demand schedule and the law of demand, the notion of the utility, and factors that affect demand. …
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Main Aspects of Theory of Demand
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Download file to see previous pages As the price of goods and services rise, the quantity demand by consumers goes down. Siddiqui (35) further describes demand as that effective desire which can be satisfied meaning that desires are simply imaginations. It is required that the demand commodity should be available at a certain place, time, and price. The demand must satisfy the following requirements; desire for the specific commodity; sufficient resources to purchase the desired commodity; willingness to spend the resources; and the availability of the commodity.
In addition, demand can also be used to measure or predict the number of commodities and services which the buyers would be motivated to buy in a market at a given time and at a given place. The changes in the price of the commodities that are related to that which a consumer uses affect the market demand for it and an example of this would be the price of margarine (which the consumer does not normally use) is much lower than the price of butter. Inevitably, the consumer will decide to go for the cheaper product although their preference lies with the more expensive one. The demand for certain commodities may also be affected by the changes of the income of potential buyers, for example, if the income of a buyer is reduced, then he will opt to purchase cheaper commodities in line with his diminished income; but if the income is increased, then the buyer’s demand for the same product at higher prices will increase significantly. The future expectations of buyers almost always have a tendency of influencing the market demand of a product and this is usually displayed by considering the income security of potential buyers. If a potential buyer is confident in his belief that his future income will be stable, then he is more likely to spend more in buying both the commodities that he needs and wants. If however, his future income is very insecure, then he is most likely to keep most of his money in savings in anticipation of a bleak financial future than spending it on commodities. ...Download file to see next pagesRead More
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