Demand
The law of demand, its determinants, and the exceptions every CBSE answer must know.
Definition
Demand is the quantity of a good or service that a consumer is willing and able to purchase at a given price during a given period of time.
Simple Explanation
Demand is not just wanting something — it is wanting it AND being able to pay for it, at a specific price.
Detailed Explanation
The Law of Demand states that, other things remaining constant (ceteris paribus), the quantity demanded of a good falls as its price rises, and rises as its price falls — giving the demand curve its characteristic downward slope.
Demand is influenced by the price of the good, prices of related goods (substitutes and complements), the consumer's income, and tastes or preferences. A change in price causes a movement ALONG the curve (change in quantity demanded); a change in any other factor SHIFTS the entire curve (change in demand).
Demand can be expressed at two levels: individual demand (one consumer's demand schedule) and market demand (the horizontal summation of every individual's demand at each price). The market demand curve is built by adding up the quantity each consumer demands at a given price.
Giffen goods are the clearest exception to the law of demand: for a specific kind of inferior good that takes up a large share of a poor household's budget (the textbook example is a staple grain), a price rise can make the household feel poorer in real terms and forces it to cut back on more expensive items, buying even more of the cheap staple — so quantity demanded rises as price rises. Every Giffen good is an inferior good, but not every inferior good is a Giffen good.
Veblen goods are a second exception, driven by psychology rather than income effects: for certain luxury goods, a higher price signals exclusivity or status, which can make some consumers want the good more, not less. This 'snob value' or conspicuous-consumption effect means demand for the good rises (or fails to fall) as price rises, even though the consumer can clearly afford the alternative.
Real-life Examples
Movement along the curve
When onion prices spike, households buy less even though they still 'want' onions just as much — this is a fall in quantity demanded along the curve.
Shift of the curve
A pay rise lets a household buy more branded clothing at the same prices — a rightward shift of the demand curve due to higher income.
Step-by-step Graph
- 1
Draw the axes
Plot Price on the Y-axis and Quantity Demanded on the X-axis.
- 2
Plot the demand schedule
Mark each price–quantity combination from the demand schedule as a point.
- 3
Draw the demand curve
Join the points to get a downward-sloping curve (DD), reflecting the law of demand.
- 4
Distinguish shift vs. movement
A change in the good's own price moves you along DD; a non-price factor (income, tastes, price of a related good) shifts the entire curve to D1D1 or D2D2.
Tables
| Type | Driven by | Effect of a price rise |
|---|---|---|
| Giffen goods | Income effect outweighing substitution effect for a budget-dominating inferior good | Quantity demanded rises |
| Veblen goods | Status/snob value attached to a higher price | Quantity demanded rises or stays unchanged |
Common Mistakes
- Calling every leftward or rightward movement a 'shift' even when caused by the good's own price — that is actually a movement along the curve.
- Treating every inferior good as a Giffen good — Giffen goods are a narrow, specific subset of inferior goods.
- Confusing Giffen goods (driven by income effects on the poor) with Veblen goods (driven by status/snob value, regardless of income).
Exam Tips
- Always state 'ceteris paribus' when writing the law of demand — examiners look for this qualifier explicitly.
- When asked to distinguish movement vs. shift, draw two small diagrams side by side for clarity.
- When citing an exception to the law of demand, name it precisely (Giffen good or Veblen good) and explain the mechanism, not just 'it doesn't follow the law'.
Summary
- Demand is backed by both willingness and ability to pay, unlike a mere desire for a good.
- The law of demand gives an inverse price–quantity relationship, ceteris paribus.
- Own-price changes cause movements along the curve; other factors cause shifts.
- Market demand is the horizontal summation of every individual consumer's demand.
- Giffen goods and Veblen goods are the two classic exceptions to the law of demand.
Practice MCQs
1. A fall in the price of tea, causing buyers to purchase more tea, represents:
2. Goods for which demand rises as income rises are called:
3. Market demand for a good is obtained by:
4. A Giffen good is best described as:
5. Demand for a Veblen good rising as its price rises is explained by:
6. Which of the following would cause a rightward shift of the demand curve for a normal good?