What is Individual Demand?
Meaning of Individual Demand: – Individual demand refers to a person’s desire for a product or service (or a household). Individual demand is the result of a person’s wishes interacting with the amount of products and services he or she can buy. We mean a person’s likes and dislikes when we say desires. Individual demand implies, the quantity of good or service demanded by an individual household, at a given price and at a given period of time. For example, the quantity of detergent purchased by an individual household, in a month, is termed as individual demand.
We suppose that the person can compare two items (or groups of items) and determine which is preferred. We make two assumptions: (1) a person prefers more to less, and (2) likes and dislikes are consistent.
For Example: – There are two commodities, music downloads ($1 each) and chocolate bars ($5 each). The individual earns $100 per month. The budget line represents the total amount of products and services that this person can purchase if all of his income is spent. It’s the solid line linking 100 downloads and 20 chocolate bars in this case. The horizontal interception is the amount of chocolate bars a person might buy if they spent all of their money on chocolate bars, and it is calculated by dividing income by the price of a chocolate bar. The vertical intercept is the number of downloads a person could buy if they spent all of their money on downloads, and it is calculated by dividing income by the price of a download. Given the pricing he faces and his available money, the budget set is all the permutations of goods and services that the individual can afford. The budget set is the triangle formed by the budget line and the horizontal and vertical axes in the diagram.
The mix of downloads and chocolate bars that is the highest among all of those that are inexpensive is an individual’s favored point. Because a person likes more to less, all of his or her earnings will be spent. This indicates that the preferred location is on the budget line. A person’s evaluation for a quantity of a good (say, five chocolate bars) is the highest he would be prepared to pay for that amount. The marginal value is the highest price he would be willing to pay for an additional unit of the good. The person’s choice rule is to purchase a quantity of each item so that: –
Marginal valuation = Price
In some cases, the individual’s option is a zero-one choice: either buy one unit of the good or buy nothing at all. The unit demand curve informs us how much a buyer is willing to pay for a product. This price corresponds to the buyer’s assessment of the item. The individual will not want to acquire the good at any price that is more than the buyer’s valuation. The person wants to acquire the good for any price below the buyer’s valuation. If this cost is completely identical to the buyer’s valuation, the buyer is undecided about whether or not to acquire the item.
To put it another way, the individual’s choice rule is to buy the good if its value exceeds its price. So because marginal valuation of the very first unit is the same for the valuation of such a unit, this is consistent with previous criterion.
Factors affecting individual demand
- Price of the Commodity: – Price is always a primary factor in determining a commodity’s demand. Typically, a large amount is demanded at a cheaper price than a lower quantity at a higher price.
- Income of the purchaser: – Demand is influenced by a variety of factors, including income. When one’s income rises, they are able to purchase more products. As a result, a wealthy consumer will typically desire more things than a poor one.
- Person’s Taste’s and Habits: –It has been found that demand for numerous commodities is influenced by a person’s preferences, habits, and tastes. The demand for a variety of products, such as ice cream, chocolates, and cold beverages, is determined by an individual’s preferences. Tea, betel tobacco, and other tobacco products are in high demand.
- Substitutes and Complementary Products and their Relative Prices: – The relative prices of other related items, such as substitutes or complementary items to a commodity, are also vital to keep in mind when determining how much a customer would also like to buy of a particular item. Substitutes are things that can satisfy a want in the same way as the original. Peas and beans, for instance, are interchangeable, as are ground nut oil and ’til oil,’ tea and coffee, Jawar and Bajra, and so on. The relative price of a commodity’s replacements determines the majority of a commodity’s demand. There will be even more demand for this commodity at a given price than for its replacements if the substitutes are substantially more expensive. For example: – a decrease in the price of automobiles will result in an increase in the demand for gasoline. This is due to the fact that when more vehicles are bought, more gasoline will be required.
- Consumer’s Expectation about the Future Change in Price: – Consumer predictions about future price fluctuations in a certain commodity might sometimes influence its demand. He would prefer to buy less at the current prevailing price if he expects its prices to fall in the future. Similarly, if he anticipates the price of the item to rise in the future, he will prefer to buy more now.
- Effects of Advertisement and Sales Propaganda: – In recent times, it has been observed that advertisements and sales propaganda can influence a consumer’s tastes and inclinations. Thus, the advertisement effect in a modern man’s life contributes to the demand for numerous products such as toothpaste, toilet soap, washing powder, processed foods, and so on.