This is an online class explaining “What is Demand?” and “Effective Demand” in the Chapter “Theory of Demand and Supply” which is a part of CA Foundation course for the subject Business Economics and Business and Commercial Knowledge. This informative video helps the students in understanding what effective demand is and the components that determine the demand for various goods and services using a real life situation as an example.

The entire world of economics is encompassed in the demand and the supply that is existent in the market.

In this chapter we will try and understand
1. The meaning of demand

Starting with the bigger economy which is the world as a whole, consists of large number of buyers and seller. These buyers and seller exchange commodities for a price on a day to day basis
These exchanges happen to satisfy the demands of the consumer.
Hence it becomes essential to understand the concept of demand
An Effective demand is created when, at a given point of time, there is
1. A desire to buy – the fact you really want to buy a product
2. An ability to pay – Do you have sufficient disposable income to afford to buy the product you desired?
3. A willingness to pay
It is important that for a demand to be effective, all there three elements are present. For e.g. a child may have a desire to buy a toy, but may not have the ability to pay. The absence of this element results in in-effective demand.
To summarize the concept of demand, “Demand refers to the quantity, consumers are willing to buy, at a given price, over a given period of time”.