Joint
or Complementary Demand:-
When
to satisfy one want two or more than two goods are demanded together, then such
a demand is called joint demand. To take a snap, we need Camera and Film; to
write a letter, we need paper, pen and ink etc. Goods which are jointly
demanded are known as complementary goods.
Composite
Demand: - Composite demand refers to the demand for one
commodity in order to satisfy two or more wants. For example, demand for milk
is a composite demand. Some people demand milk to prepare cheese, others to
prepare curd and still others to prepare sweet meats etc. Total demand for milk
is called composite demand.
Direct
And Derived Demand:
- when
a commodity is demanded for its direct consumption it is called direct demand.
For example, demand for cold drink when feeling thirsty or demand for woolen
blanket when feeling cold. Derived demand refers to the demand for one commodity
as a result of demand for another. For example, demand for bricks, cement,
lime, timber etc. is derived demand as the same arises out of the demand for a
house. Derived demand is another form of joint demand.
Competitive
demand:
- Demand
for substitutes is known as competitive demand. An increased demand for one
means reduced demand for the other. Substitutes are those goods which can be
used for one another. At a given income, change in the price of one leads to
change in the demand for the other. For example, Campa and limca. If price of
campa increases then demand for limca will rise
The amount of a good that a consumer is willing
to give up for another good, as long as the new good is equally satisfying.
It's used in indifference theory to analyze consumer behavior. The marginal
rate of substitution (MRS) is calculated between two goods placed on an
indifference curve, displaying a frontier of equal utility for each combination
of "good A" and "good B". The marginal rate of substitution
is always changing for a given point on the curve, and mathematically
represents the slope of the curve at that point. For example, a consumer
chooses between hamburgers and hotdogs. In order to determine the marginal rate
of substitution, the consumer is asked what combinations of hamburgers and
hotdogs provide the same level of satisfaction. When these combinations are
graphed, the slope of the resulting line is negative. This means that the
consumer faces a diminishing marginal rate of substitution: the more hamburgers
they have relative to hotdogs, the fewer hotdogs the consumer is willing to
give up for more hamburgers. If the marginal rate of substitution of hamburgers
for hot dogs is 2, then the individual would be willing to give up 2 hotdogs in
order to obtain 1 extra hamburger.
A small fall in the price of a product may lead to a considerable increase in the quantity demanded, but sometimes even a considerable fall in price may not lead to any increase in demand. The degree of responsiveness of demand to small change in price differs from commodity to commodity. Degrees of elasticity of demand are classified into four types:-
Unit Elasticity:
Demand is unit elastic when percentage change in
quantity demand and percentage in price are equal. In case of unit elastic
demand the demand curve is a Rectangular Hyperbola. In practice it is difficult
to find such commodities as have a demand curve whose elasticity is unit
throughout.
Relatively inelastic demand (ed < 1):
Demand is said to be relatively inelastic or less than unity when
proportionate change in demand is less than proportionate change in price. In
such cases the slope of demand curve falls rapidly.
Perfectly
inelastic demand (ed = 0):
When there is no change in demand as a result of increase or decrease in
price then the demand is perfectly inelastic. The demand curve is vertical on
OX axisPerfectly elastic demand (ed = oc):
The demand is perfectly elastic when even a small change in price cause an infinite large change in amount demanded. A small rise in price on the part of a seller reduces the demand to zero. In such cases the demand curve is parallel to OX axis.
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