Theory question 107
Theory of Demand(a) What is a demand schedule?
(b) State the law of demand.
(c) Using appropriate examples, explain the following types of demand: (i) competitive demand; (ii) derived demand; (iii) joint demand; (iv) composite demand.
Show the model answer
(a) A demand schedule is a table showing the quantities of a commodity that consumers are willing and able to buy at various prices at a given time.
(b) Other things being equal, the higher the price of a commodity, the lower the quantity demanded, and the lower the price, the higher the quantity demanded.
(c)(i) Competitive demand: demand for goods that are substitutes, e.g. tea and coffee; a rise in the price of one raises demand for the other.
(ii) Derived demand: a good or factor is demanded because of what it helps to produce, e.g. labour or cement demanded because of demand for houses.
(iii) Joint demand: goods demanded together, e.g. car and petrol, torch and battery.
(iv) Composite demand: a good demanded for several different uses, e.g. sugar for soft drinks, confectionery and home use; wood for furniture and fuel.
Each type needs a correct example.