Demand

1) Meaning and core idea

In economics, demand refers to the relationship between the quantity of a good/service a consumer is willing and able to buy and the price of that good, holding other factors constant (ceteris paribus), during a given period of time.

Two common usages:

Quantity demanded (Qd): A specific amount at a specific price (a point).
Demand (or demand schedule/function): The whole relationship between price and quantity (a curve/function).

Key CUET-PG clarity point:
Demand is not “desire.” A desire becomes demand only when backed by purchasing power and willingness to pay.

2) Demand function: general form

A general demand function can be written as:

Q_d = f(P_x, Y, P_r, T, E, N, A, \ldots)

Where:

$P_x$ : price of the good itself
$Y$ : consumer income
$P_r$ : prices of related goods (substitutes/complements)
$T$ : tastes/preferences
$E$ : expectations about future prices/income
$N$ : number of consumers / population structure
$A$ : advertising and other factors

When we focus on the law of demand, we write:

Q_d = f(P_x) \quad \text{with other factors held constant}

3) Demand schedule and demand curve

(a) Individual demand schedule

A table showing how much one consumer buys at various prices.

(b) Market demand schedule

Adds up quantities demanded by all consumers at each price:

Q^M = \sum_{i=1}^n Q_i

(c) Demand curve

Graph of price (vertical axis) vs quantity (horizontal axis). Typically downward sloping.

Why price on Y-axis? Convention from early Marshallian diagrams; it also helps interpret “price as independent variable” in simple partial equilibrium graphs.

4) Law of demand and its intuition

Law of demand:
Other things equal, quantity demanded increases when price falls and decreases when price rises.

Why does demand slope downward?

4.1 Substitution effect (SE)

When price of good $X$ rises, $X$ becomes relatively more expensive than other goods. Consumer substitutes away from $X$ .

Present in almost all normal consumer choice settings.
Strongly tied to relative price logic.

4.2 Income effect (IE)

When price of $X$ rises, real purchasing power falls (you’re effectively “poorer”). You may buy less of $X$ .

For normal goods, IE reinforces SE (both reduce Qd when P rises).
For inferior goods, IE works opposite to SE (IE may increase Qd when P rises), but usually SE dominates.

CUET-PG linkage: This becomes precise under indifference curve analysis later (Slutsky vs Hicks decomposition). But even at “Demand” stage, you should know: downward slope is explained by SE + IE.

5) Movements along demand curve vs shifts of demand curve

A very common exam trap.

5.1 Movement along the demand curve (“change in quantity demanded”)

Caused by change in the good’s own price.
Graphically: move from one point to another on the same curve.

Example: Price of tea falls → quantity demanded of tea rises (movement along).

5.2 Shift of demand curve (“change in demand”)

Caused by change in non-price determinants (income, tastes, etc.).
Graphically: entire curve shifts left/right.

Example: Income rises (for a normal good) → demand curve shifts right at every price.

6) Determinants of demand (non-price factors) in detail

6.1 Income ( $Y$ )

Normal good: demand increases with income ( $\partial Q/\partial Y > 0$ ).
Inferior good: demand decreases with income ( $\partial Q/\partial Y < 0$ ).
Necessities vs luxuries: both can be normal goods; the difference shows in income elasticity magnitude (later).

Conceptual clarity:
Inferior doesn’t mean “bad,” it means as income rises, you buy less of it (e.g., coarse grains for some consumers, second-hand goods, etc.). Context matters.

Substitutes

If $P_{sub}$ rises, demand for $X$ rises.
Example: Coffee and tea (for many consumers).
Cross-price effect: $\partial Q_x / \partial P_{sub} > 0$ .

Complements

If $P_{comp}$ rises, demand for $X$ falls.
Example: Cars and petrol; printers and ink.
Cross-price effect: $\partial Q_x / \partial P_{comp} < 0$ .

6.3 Tastes and preferences

Changes in fashion, health awareness, cultural shifts, etc.

If tastes shift in favor of the good → demand shifts right.
If tastes shift away → demand shifts left.

6.4 Expectations (future prices/income)

If consumers expect future price to rise, current demand may rise (stockpiling).
If expect future income to fall, demand may fall now.

CUET-style angle: Expectation-based questions often test whether the demand shifts today.

6.5 Population / number of buyers

More consumers → market demand shifts right.

Also: demographic composition matters (age structure, urbanization). This is especially relevant for Indian economy applications.

6.6 Advertising and information

Advertising can shift demand by:

Informing (reducing search costs)
Persuading (changing tastes)
Signaling quality

7) Demand curve shapes and special cases

7.1 Linear demand

Q = a - bP,\; a>0,\; b>0

Intercepts:

Price intercept: $P = a/b$
Quantity intercept: $Q=a$

7.2 Nonlinear demand

Often more realistic: curvature reflects changing sensitivity to price.

7.3 Perfectly elastic, perfectly inelastic

Perfectly elastic: horizontal line (consumer buys any amount at that price; typical for a firm in perfect competition, not for market demand).
Perfectly inelastic: vertical line (Q fixed regardless of price; extreme necessities or short run constraints).

8) Elasticity basics (because CUET often mixes it with demand)

Even though “Elasticity” is not explicitly listed as a separate bullet in your syllabus, CUET PG questions frequently test elasticity in the “Demand” area. So you need core concepts.

8.1 Price elasticity of demand (PED)

E_d = \frac{\%\Delta Q}{\%\Delta P}

Usually negative; we often discuss magnitude.

Determinants of PED:

Availability of substitutes (more substitutes → more elastic)
Necessity vs luxury (necessities less elastic)
Proportion of income (higher share → more elastic)
Time (longer time → more elastic)

8.2 Relationship between linear demand and elasticity

For linear demand $Q=a-bP$ , elasticity varies along the curve:

Upper segment: more elastic
Lower segment: less elastic
Midpoint: unit elastic

Revenue link (very common MCQ):

If demand is elastic, price cut increases total revenue.
If inelastic, price cut decreases total revenue.
If unit elastic, revenue unchanged.

9) Exceptions / “apparent” violations of the law of demand

In standard theory, demand is downward sloping, but there are famous special cases:

9.1 Giffen goods (very rare)

A strongly inferior good where the negative income effect dominates the substitution effect, causing quantity demanded to rise when price rises.

Conditions:

Good is inferior and forms large part of consumer budget
Few close substitutes
Strong income effect

9.2 Veblen goods (snob/prestige goods)

Higher price may increase demand because price signals status (conspicuous consumption). Here, the “demand” story is not standard utility-maximization with stable preferences; it is preferences depending on price/status.

9.3 Speculative demand

In asset markets, rising prices can raise demand if buyers expect further price increases (bubbles).

Exam note: CUET questions may ask: “Which of the following causes an upward sloping demand curve?” Options often include Giffen/Veblen/speculation—know which mechanism belongs to which.

10) Demand in the broader CUET micro framework (interlinking)

Demand is the foundation for many later topics:

Utility theory explains why demand slopes downward and how demand is derived from utility maximization.
Indifference curve formalizes substitution and income effects.
Consumer surplus is computed from demand curve area.
Market structures rely on demand (firm’s revenue, AR/MR) to determine output and price.
Welfare and externalities use demand (marginal benefit) curves vs supply (marginal cost) curves.

So, in CUET PG, “Demand” is not isolated: it is repeatedly used for numericals, welfare questions, and market equilibrium logic.

11) Common CUET-PG traps and how to avoid them

Confusing shift vs movement (income change shifts; own price change moves along).
Confusing demand with quantity demanded (curve vs point).
Substitute vs complement sign errors (cross-price elasticity sign).
Giffen vs Veblen (income-effect-dominates vs prestige/status preference).
Market demand vs individual demand (horizontal summation across consumers).