Demand refers to the quantity of a commodity that can be purchased by a consumer or consumers at various prices or a specific price within a given period.
All things being equal, the higher the price, the lower the quantity demanded; the lower the price, the higher the quantity demand.
This is commonly called the law of demand.
There are essentially seven types of demand namely;
- Joint demand
- Derived demand
- Competitive demand
- Composite demand
- Direct demand
- Individual demand
- Market demand
1. Joint demand: When two or more commodities are required together to satisfy a specific want, this is referred to as joint demand.
It occurs when two or more goods are used jointly so that they are demanded together.
Joint demand occurs when the demand for one good is directly related to the demand for other goods so that a rise in the demand for one good increases the demand for the others.
In a joint demand situation, if one of the commodities' demands rises, the demand for the others rises as well.
Conversely, a fall in the demand for one commodity will lead to a fall in the demand for the other.
Because joint demand exactly describes complementary goods, Joint demand is also called complementary demand
Because goods with joint demand are usually complementary goods, joint demand also has a negative cross-price elasticity of demand.
Examples of goods that have joint demand are car and petrol, book and biro etc.
2. Derived demand: This occurs when commodities are acquired for the production of other commodities rather than for the direct satisfaction of wants.
Flour, for example, may be required for bread production rather than direct consumption.
Derived demand applies to intermediate goods such as raw materials, machines, and equipment.
Derived demand is also applicable to factors of production such as land, capital and labour.
The demand for management is also derived.
It should be noted that derived demand is also circuitous demand
3. Competitive demand: This demand occurs when consumers have a variety of substitute goods to choose from.
This type of demand is common with commodities that have close substitutes where consumers can easily switch from one good to another
In competitive demand, If the demand for one rises, the demand for others will fall.
In contrast, if the demand for one good falls, the demand for others will rise
Most goods with competitive demand are substitutes, and therefore, have a positive cross-price elasticity of demand.
The demand for Pepsi and Coca-cola is a good example of goods with competitive demand
4. Composite demand: The overall demand for a commodity that has several uses constitute the composite demand for that commodity.
To put it in another way, composite demands occur when goods have multi-use and can be employed for a variety of purposes.
Wood, for example, has a composite demand due to its numerous uses, which include constructing tables, chairs, and desks.
Therefore, if the price of wood rises, the price of tables, chairs, and desks will rise
5. Direct demand: This occurs when goods are in demand for immediate consumption.
Direct demand arises out of a person's natural desire to consume a particular product.
This type of demand is usually driven by the biological, physical, personal and social needs of the consumer.
Final goods such as food, shelter, and cloth usually have a direct demand.
6. Individual demand: This is the number of goods and services bought by an individual or household consumer at a given price and time.
Individual demand is affected by factors such as consumer income, preference, tastes and more importantly, the price of the commodity.
To illustrate, the number of pens bought in a month by a consumer or household will constitute their demand for pens for that month
7. Market demand: This is the aggregate individual demand for goods and services in a given market over a given period.
Market demand can also refer to the horizontal summation of all individual demands in a market.
For example, suppose there are five customers in a market who each purchase 40 pens, 30 pens, 25 pens, 15 pens, and 10 pens over a month.
It follows that the market demand for pens in that month is 120 pens.
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