La teoría de la demanda establece que la cantidad que un consumidor está dispuesto a comprar de un bien varía inversamente con su precio, mientras que el cronograma de demanda individual muestra la cantidad que se puede adquirir a precios alternativos. La curva de demanda del mercado se forma al sumar las demandas individuales y puede desplazarse debido a cambios en factores como ingresos y gustos. Además, hay bienes normales e inferiores, y ciertas curvas de demanda anormales pueden violar la ley de la demanda, como en el caso de bienes de lujo o expectativas de precios futuros.

1. Theory of Demand

2. Meaning of demand
The individuals demand for a
commodity: is the amount of a
commodity which the consumer is
willing to purchase at any given price
over a specified period of time. The
individual's demand for a commodity
varies inversely price ceteris paribus.

3. Individual demand schedule
It means the units of good or service
that the individual is willing and able to
purchase at alternative prices during a
given period of time.
Market demand schedule: It is
showing total demand of a commodity
by all households in the market of a
commodity. The market curve is the
summation of all individual household
demand curves.

4. For Example
There are only two consumers, Person
A and Person B. Person A is buying
10 of this quantity and Person B is
buying 15 units when the price is 3$.
Thus, at a price of 3$ the total quantity
demanded in the market is 25 units
(10+15) of this commodity.

5. Individual and Market demand
curve

6. Law of the Demand
Assumptions of law of demand
There are three main assumptions of the Law:
 There should not be any change in the
tastes of the consumers for goods.
 The purchasing power of the typical
consumer must remain constant.
 The price of all other commodities should
not vary.

7. Law of demand
The law of demand states that other
factors being constant (cetris peribus),
price and quantity demand of any
good and service are inversely related
to each other. When the price of a
product increases, the demand for the
same product will fall.

8. Numerical Example and Graph of Demand
Curve
Price of Good Quantity demanded of Good
5 10
4 20
3 30
2 40
1 50

9. Change in demand vs. change in
quantity demanded
 Change in demand: Occurs when the
entire demand curve shift either to the
right or the left, that demand has
changed.

10. A change in demand means that at
constant price OPO more OQ, is
demanded. This is illustrated by a shift
of the demand curve either to the right
(increase in demand) or to the left (a
decrease in demand).

11.  Quantity demanded: It means total
number of units of a good that buyers
are willing and able to buy at a
particular price is called quantity
demanded as shown in graphic
bellow:

12. An increase in the amount of the
commodity demanded is concerned
with the movement along the demand
curve, downwards and it is due to a fall
in the price of the commodity. At OP2
price, the amount demanded is OQ2
and when prices reduce to OP1, more
of the commodity OQ, is demanded. If
the price increases from OP1 to OP2,
the amount demanded reduces from
OQ1 to OQ2

13. . Change in quantity
demanded
It designates the movement from one
point to another point (from one price-
quantity combination to another price-
quantity combination) on a fixed
demanded curve.

14. Shifts in demand curve
Demand, as we know, is determined by many
factors. When there is a change in demand
due to one or more than one factors other
than price, results in the shift of demand
curve.
For Example :
 if the level of income in community raises,
other factors remaining the same, the
demand for the goods increases. Consumers
demand more goods at each price per period
of me (rise or Increase in demand). The
demand curve shifts upward from the original
demand curve indicating that consumers at
each price purchase more units of commodity
per unit of time.

15.  If there is a fall in the disposable
income of the consumers or rise in
the prices of close substitute of a
good or decline in consumer taste or
non-availability of good on credit,
there is a reduction in demand (fall or
decrease in demand). The fall or
decrease in demand shifts the
demand curve from the original
demand curve to the left. The lower
demand curve shows that consumers
are able and willing to buy less of the
good at each price than before.

16. Pdx ($) Qdx Rise in Qdx Fall in Qdx
12 100 300 50
6 250 500 200
4 500 600 300

17. Determinants of demand :
 the tastes or preferences of consumer
 the number of consumer in the market
 the incomes of consumers
 prices of related goods
 consumers expectations about future
prices and income

18.  Tastes and preferences : Taxes and
preferences depend on habit, age, sex,
education, time,
religion etc. When they are favorable to
the commodity, its quantity demanded
increases, and when they are
unfavorable quantity demanded falls.
 For example,
During the winter season, quantity
demanded of woolen clothes increases
and falls during the summer season.
In Christmas time, the quantity
demanded of Christmas cards increased.

19.  The number of consumer in the market
An increase in the number of consumers
in a market will increase demand. Fewer
consumers will be reflected by a decrease
in demand.
 The income of consumers : There are
two goods: Normal goods and Inferior
goods
 Normal goods : A rise in income will
cause an increase in demand is called
normal goods. The demand for a normal
good rises as income rises and falls as
income falls. The demand for a normal
good and income are directly related.

20. Graph of Normal Goods

21.  Inferior Goods : A good the demand for which falls
as income rises. The demand for an inferior good
and income are inversely related. The demand for
an inferior good falls as income rises and rises as
income falls.

22.  Prices of related goods : Whether a
given change in the price of a related
good will increase or decrease the
demand for a product will depend on the
related good is a substitute for it or
complement to it.
 Substitutes : A substitutes is a good
which can be used in place of another
good. In other words, where two
commodities can be used to satisfy the
same demand. For example, Tea &
Coffee, Butter & Margarine, Chicken &
Beef. Substitute’s goods if an increase in
the price of one good result in an
increase in the demand for the others.

23. For Example
Price of Tea Quantity demanded of Tea Price of Coffee Quantity demanded of Coffee
300 Rwf 10 Kg. 300 Rwf 15 Kg.
350 8 300 20
400 6 300 25
450 4 300 30

24.  Complements : Where commodities
are jointly demanded is called
complements. For example, Cars &
petrol, Cameras & film, CDs & CD
Player etc. Complementary goods if
an increases in the price of one result
in a reduction in the demand for the
others.

25. For example
Price of Cars Quantity demanded of Cars Price of Petrol Quantity demanded of Petrol
5000$ 50 2$ 900Lit
6000$ 40 2$ 800
7000$ 35 2$ 700
8000$
30
2$ 600

26. Abnormal demand curve
 Abnormal demand curves violate (to break)
the Law of demand. These are also called
regressive demand. The demand curve is
abnormal at high price level. These curves
arise in the following circumstances:
 Articles of ostentation: Some goods are
luxuries items where satisfaction comes from
knowing the price of the good. For example,
luxurious cars (Land cruiser), Designer
clothes, Jewelry etc. These are luxurious
items. When their prices increase people buy
more of them because people on high
incomes. They can pay easily for all these
articles.

27.  Price expectation: When prices are expected to
increase, consumer buy more commodities as price
increase because they expect further price increase.
Seller also increases prices because demand is
increasing. For example, War expectations. When people
expect that after some time there is a possibility of war.
 Giffen goods: These are highly inferior goods that
people on low incomes spend a high proportion (A part of
the income) of their income on. When prices fall, they are
able to discard the consumption of these goods (having
already satisfied their demand) and move on to other
better goods. Demand may fall when the price falls.
These trends to be very basic foods such as rice and
potatoes. When its price increases, one tends to buy
more of it and less when the price falls. When the price of
such a commodity increases, the consumers gives up
other commodities and buy this commodity when its price
falls the consumer buy less of it and spends on
commodities he had previously given up. The demand
curve of given good is abnormal at low price levels.

28.  Effect of depression: A depression is
a period of low prices, low incomes,
low purchasing power and low
economic activity. During such a
period, prices are low while demand is
also low.