It is better to begin our study of the term ‘demand‘ with the basic question: What is demand? What do we mean when we speak of demand? The concept of demand is different in Economics from its meaning in day-to- day usage and usual conversation.
In the discipline of Economics the word ‘demand’ connotes the amount of a particular commodity or a group of products that customers are willing to and capable of purchasing at a particular price. In other words, the term ‘demand’ implies the desire for a commodity, backed by ability and willingness to pay for it.
It must be remembered that in economics, other factors too are intimately connected with demand. First, demand implies that the commodity in question is demanded because it is considered to be useful by the purchaser. Second, nothing will be considered as ‘demand’ unless it is backed up by enough money to pay for the good demanded.
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For example, everyone wants a car of his own. However, only ‘want’ does not imply demand in economics. Demand for a car means not only willingness to buy the car but also one’s affordability to do so. As a result, demand of a car is measured by the aggregate demand of those who are willing to buy and can also afford by buy cars.
In the definition of demand, we find two key words – commodity (or a set of products) and price. So while discussing the concept of demand, we should specify the commodity in question, since the demand for various commodities vary with each other because of their nature and usefulness. For example, the demand for biscuits is not equal to the demand for tractors.
Along with the name of the product, price of the product should also be mentioned. So in any discussion on demand, not only the name of the product is essential, but also the price of the product plays an important role.
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This is why the statement, ‘the total demand for butter-scotch ice-cream is 300 units’ is considered to be a useless one to an economist, for the price at which 300 units are expected to be sold has not been mentioned or specified.
The quantity of demand for butter-scotch at Rs.10 per unit does not remain the same when the price of the product is charged Rs. 50 per unit. This explains the relevance of price in the concept of demand.
For better conceptualisation of the above aspects of economics let us now proceed to the discussion of the Demand Schedule.