Demand and its Elasticity

Introduction

Definition of Demand

Demand refers to the quantity of good or service a consumer is willing and able to pay. Or still demand is the desire to obtain a particular commodity backed by the ability to pay for it ie Purchasing power. It should however be noted that demand must always be backed by the purchasing power of the consumer to be known as Effective demand. Effective demand is demand back by the purchasing power. Demand should not be confused with mere desire of something which is not backed by price

The Demand Schedule

The demand schedule is a table that represents the various quantities and prices of goods that a consumer is willing and able to buy.

The demand curve

This is simply the graphical representations of the demand schedule. The demand curve slopes down from left to right which indicates that « the higher the price, the lower the quantity demanded ceteris paribus(everything being equal or everything reamining constant)

The Elasticity of Demand

The elasticity of demand refers to the degre of responsiveness of quantity demanded to changes in the price of the commodity, the price of other goods etc. It can also be defined as the rate at which quantity demanded changes as a result of changes in prices. There exist three main types of elasticity of demand as seen below.

Types of elasticities of demand

1. Price elasticity of demand (PED): It refers to the degree of responsivesness of quantity demanded to changes in prices.

2. Income elasticity of demand(YED): It refers to the degree of responsiveness of quantity demanded as a result of changes in the level of consumers income

3. Cross elasticity of demand (XED): It refers to the degree of responsiveness of quantity demanded of a particular good say good A to change as a result of change in the price of another good say Good B.