The Law of Demand states that when the price of a commodity falls, its demand increases and when the price of a commodity rises, its demand decreases; other things remaining constant. Thus, there exists an inverse relationship between price and quantity demanded of a commodity. The functional relationship between price and quantity demanded can be represented as Dx = f(Px). Now let us discuss the Demand Schedule in detail.
It is a statement in the form of a table that shows the different quantities in demand at different prices. There are two types of Demand Schedules:
- Individual Demand Schedule
- Market Demand Schedule
Browse more Topics under Basic Elements Of Demand And Supply
- Determinants of Demand
- Law of Demand
- Individual and Market Demand Curve
- Change in Demand
- Exceptions to Law of Demand
- Concept and Determinants of Supply
- Law of Supply
- Supply Schedule
- Individual and Market Supply Curve
- Change in Supply
- Exceptions to Law of Supply
- Equilibrium Price
- Price Elasticity of Demand
- Cross Price Elasticity of Demand
- Income Elasticity of Demand
- Price Elasticity of Supply
Individual Demand Schedule
It is a demanding schedule that depicts the demand of an individual customer for a commodity in relation to its price. Let us study it with the help of an example.
|Price per unit of commodity X (Px)||Quantity demanded of commodity X (Dx)|
The above schedule depicts the individual demand schedule. We can see that when the price of the commodity is ₹100, its demand is 50 units. Similarly, when its price is ₹500, its demand decreases to 10 units.
Thus, we can conclude that as the price falls the demand increases and as the price raises the demand decreases. Hence, there exists an inverse relationship between the price and quantity demanded.
Individual Demand Curve
It is a graphical representation of the individual demand schedule. The X-axis represents the demand and Y-axis represents the price of a commodity.
The above demand curve shows the demand for Gasoline. When the price of gasoline is $3.5 per litre, its demand is 50 litres and when the price is $0.5 per litre, its demand is250 litres.
Market Demand Schedule
It is a summation of the individual demand schedules and depicts the demand of different customers for a commodity in relation to its price. Let us study it with the help of an example.
|Price per unit of commodity X||Quantity demanded by consumer A (QA)||Quantity demanded by consumer B (QB)||Market Demand QA + QB|
The above schedule shows the market demand for commodity X. When the price of the commodity is ₹100, customer A demands 50 units while the customer B demands 70 units.
Thus, the market demand is 120 units. Similarly, when its price is ₹500, Customer A demands 20 units while customer B demands 30 units.
Thus, it’s market demand decreases to 40 units. Thus, we can conclude that whether it is the individual demand or the market demand, the law of demand governs both of them.
Market Demand Curve
It is a graphical representation of the market demand schedule. The X-axis represents the market demand in units and Y-axis represents the price of a commodity.
Solved Example on Demand Schedule
Enumerate the determinants of demand?
Ans. In addition to the price of a commodity, there are also other factors that govern or determine the demand of the commodity. Some of the major determinants of demand are:
- Price of the related goods i.e. substitute goods and complementary goods.
- Level of Income
- Expected change in price
- Tastes and preferences of the buyer
- Size of population
- Distribution of income and wealth