Learning objectives:

  1. Define demand.
  2. Prepare demand schedule.
  3. Draw demand curve.
  4. Explain the law of demand.
  5. Narrate assumptions of the law of demand.
  6. Narrate the practical importance of law of demand.
  7. Describe the limitations of law of demand.
  8. State exceptions to the law of demand.
  9. distinguish between rise and fall in demand.
  10. Differentiate between expansion and contraction in demand.
  11. Identify factors causing changes in demand.

The desire to have something or enjoy a service is commonly known as demand. The experts say that demand is an effective desire for goods and services. A person must be ready to buy commodity and at the same time he must have money for that. Then such desire can be treated as demand. It means that the person is willing and able to pay for commodity he wants to buy. A poor person may think to buy luxury car. It is his desire, as he has no money to pay the price. On the other hand, a rich person may think to buy such car. His desire is called demand as he has money to pay the price. Moreover he is willing to pay.

Demand is linked with ability to pay and willingness to pay. If a man is willing to pay but has no money to pay then it will be a desire and not demand. In the same way, if he is able to pay but is not willing to pay even then his desire cannot be called demand. In order to change desire into demand it is necessary that he must be willing and able to pay. Thus demand means desire backed by willingness and ability to pay.