Learn with steem||The theory of demand cont'd||Types of demand and Demand function

Hello steemit friends,

I trust your day is going on very well as planned individually. There is always a joy that comes with fufilling a set plan for the day, I don't know about you all but I am always fulfilled when I achieve all my said plans.

Today I will he enlightening my steemit friends further on the types of demand and demand function.

I has treated the theory of demand in my previous post where I extensively explained the meaning of demand, factors that affects demand, demand schedule and curve.

In this post, i will explain the types of Demand, Demand function and work on some calculations.

TYPES OF DEMAND

• Derived demand: Derived demand is a type of demand made as a result of a demand for another commodity. The demand for one commodity brings about the demand for another commodity through which the first demand would be met.

For example, flour, sugar, butter, flavour and eggs are needed for the demand of cakes. Milo, milk and sugar is needed for the demand of tea. So the flour, sugar, butter, flavour and eggs are the derived demand.

• Joint demand: This demand is when a demand for a commodity affects another commodity that are related at the same time. The two commodities are said to be complementary to each other such that a demand for one leads to the deamnd of the other one.

Examples of such commodities are bread and butter, Milo and milk, stove and kerosene, car and petrol, etc.

source

• Competitive demand: A demand is said to be competitive when two commodities are close substitute and serve the same purpose. An increase in the demand of one of these commodities leads to a decrease of the other commodity becsuse they both perform the same function and serve the same purpose.

Examples of commodities of such are indomie noodles and golden penny noodles, dettol antiseptic liquid and salvon antiseptic liquid, Malta Guinness and Maltina, etc.

Examples of competitive commodities_source

When the price of any of this commodity pairs is high, the substitute becomes the preferred by the consumer.

• Composite demand: Composite Demand is when a commodity is used to serve for two or more purpose. The demand of one commodity for a certain purpose will serve another purpose either at the same time or later time.

Example of a composite demand is Salt, the demand of salt for the preparation of a pot of soup will also serve for the preparation of Rice. The demand for fuel can serve for both cars and electrical purposes.

DEMAND FUNCTION

Demand function is a mathematical equation that is used to measures the relationship between the quantity of goods demanded and the major factors that affects it.

The mathematical expression is shown below:

Qd = F(P,Ps,Po, I, T,.........)

This means that the Qd is determined by the factors in the brackets

Where;
Qd = Quantity demanded
F = Function
P = Price
Ps = Price of substitute goods
Po = Population
I = Income
T = Taste

Illustration one

The quantity of goods demanded in a period of time is a function of price and the relation is expressed as:

Q=120 - ¼ (P)

1. Find the quantity demanded when price is:
   (a.) #60 (b.) #200 (c.) #0

2. Suppose the relation is later expressed as: P = #(360 - 6Q), find P when Q is
   (a.) 0 (b.) 20 (c.) 50

1. Solution

Qd = 120 - ¼ (P)

(a.) when price is #60
Substitute P with 60 in the equation
Qd = 120 - ¼ (60)
= 120 - 15
= 115
Therefore, when Price is 60, Quantity is 115

(b.) when price is #200
Qd = 120 - ¼ (200)
= 120 - 25
= 95
Therefore when price is #200, Quantity is 95

(c.) when price is 0
Qd = 120 - ¼ (0)
= 120 - 0
= 120
Therefore when price is #0, Quantity is 120

NB: When the price increased to #200, the quantity demanded reduced to 95 and when it decreased to #60, the quantity increased to 115.

You can see the law of demand effective here.

2. Solution

P = #(360 - 6Q)

(a.) When quantity is 0
Substitute Q with 0
P = #(360 - 6(0))
= #(360 - 0)
= #360
Therefore when quantity is 0, the price is #360

(b.) When quantity is 20
P = #(360 - 6(20))
= #(360 - 120)
= #240
Therefore when quantity is 20, price is 240

(c.) When quantity is 50
P = #(360 - 6(50))
= #(360 - 300)
= #60
Therefore when quantity is 50, price is #60

CONCLUSION

The demand function gives a better explanation of the law of demand and even demand theory as a whole. I believe this lesson has been of great benefit to my steemit friends.

Thanks for visiting my blog

Beetees 💓