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NEED/DESIRE/WANT/DEMAND
NEED-Arousal of awareness or
recognition that one has to take some
action to remove a particular feeling.
 Something missing that requires to be
obtained to remove the
feeling.Eg.hunger,rest,illness etc
 Related with essentials of life without
which one cannot live

DESIRE

Awareness of need leads to desire for
satisfying it or removing it.
WANTS

Desire backed by purchasing power for
satisfying it or removing it
NEED$ AND WANT$
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One important
idea in economics
is that of needs
and wants.
NEED$ AND WANT$

Needs would be defined as goods or
services that are required. This would
include the needs for food, clothing,
shelter, health care. These are things
you must have to live.
NEED$ AND WANT$

Wants are goods or services that are
not necessary but that we desire or
wish for.
NEED$ AND WANT$

For example, one needs clothes, but
one may not needs designer clothes.
One does not need toys, movies, or
games. One needs food, but does not
have to have steak or dessert.
NEED$ AND WANT$

Many times
advertisers try to
appeal to consumers
in such a way that the
consumers feel they
need certain goods or
services when in fact
they only want them.
NEED$ AND WANT$
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Do you need this or do you want this?
NEED$ AND WANT$
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Need or want?
NEED$ AND WANT$
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Need or want?
NEED$ AND WANT$
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Try this need and wants activity.
Activity
Resources

Needs and Wants
Human Wants
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Goods are priced because of their
usefulness; Usefulness leads to the
demand while scarcity leads to its
supply. Therefore the interaction of
demand and supply is the point where
the prices of goods is determined.

Human Wants : The basis of all
economic activities is the existence of
human wants and the process of
fulfillment of this want is where all
economics activities start.
Definition of Human Want :
 . “Desire is the wish to have something.
But ‘want’ is an effective desire for a
particular thing, which can be satisfied
by making an effort to acquire it.

Human Wants
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Three elements that make a desire, an
effective desire or a want:
(i)
willingness
(ii) resources for fulfilling the desire and
(iii) willingness to part with the resource
to fulfill that desire
In other words its the want-effort-satisfaction
which forms the subject matter of economics
DEMAND

Quantity purchased at a given price
and at a given point of time
Features of Human Wants
Classification of Human Wants : necessaries, comfort
and luxuries.
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Features :
1.
2.
3.
4.
5.
6.
7.
8.
9.
Unlimited Wants
Some wants are complementary
A single want is satiable
Substitutability of Wants
Wants are competitive
Wants multiply
Wants re-occur
Some wants can be postponed
Wants differ in urgency and intensity
Economic Significance of
Human Wants
The material prosperity of a country
can be gauged from the number and
variety of human wants normally
satisfied.
 2 Shows important features which are
the basis of important laws in
Economics – Laws of diminishing return,
law of substitution, etc
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1
Consumption

Goods and services need to be
consumed in order to satisfy human
wants. Consumption is registered the
beginning as well as the end of all
economic activities.
Utility

Utility refers to want satisfying power
of a commodity.

In objective terms, utility may be
defined as the “amount of satisfaction
derived from a commodity or service at
a particular time”.
•
Utility can be measured.
Demand
Meaning and Definition of Demand
 According to Benham: “The demand for
anything, at a given price, is the
amount of it, which will be bought per
unit of time, at that price.”
 According to Bobber, “By demand we
mean the various quantities of a given
commodity or service which consumers
would buy in one market in a given
period of time at various prices.”
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Requisites:
a. Desire for specific commodity.
b. Sufficient resources to purchase the
desired commodity.
c. Willingness to spend the resources.
d. Availability of the commodity at
e. (i) Certain price (ii) Certain place (iii)
Certain time.

Kinds of Demand
1. Market
demand
2. Individual demand
3. Income Demand-(later)
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4. Cross demand
Demand for substitutes or competitive
goods (eg.,tea & coffee, bread and rice)
Demand for complementary goods (eg.,
pen & ink)
5. Joint demand (same as
complementary, eg., pen & ink)
6. Composite demand-D for a good that
has multiple uses (eg., coal &
electricity)
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7. Direct demand (eg., ice-creams)
8. Derived demand (eg., TV & TV
mechanics)
9. Competitive demand (eg., desi ghee
and vegetable oils)
10.Demand of unrelated goods
Factors Determining Demand
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(i) Price of the commodity – Normally
there is an inverse relationship
between the price of the commodity
and the quantity demanded. (Px)
(ii) Income of the Consumer –
Determines the purchasing power of
the consumer. Generally, there is a
direct relationship between the income
of the consumer and demand. (Y)
Qdx = f (Px, Pr ,Y , T, D)
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(iii) Consumer’s taste and preference
(T)
(iv) Price of related commodities (Pr)
(v) Consumer Expectation (expected
change in price)
(v) Distribution of income
(vi) Size and composition of population
(vii) Other Factors e.g., natural
calamities
DEMAND

The Demand for a commodity is the
amount of it that a consumer will
purchase at various given prices in a
given period of time
Law of Demand
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Prof. Samuelson: “Law of demand
states that people will buy more at
lower price and buy less at higher
prices, others thing remaining the
same.”
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Ferguson: “According to the law of
demand, the quantity demanded varies
inversely with price”.
Assumptions:
No change in tastes and preference of
the consumers.
 Consumer’s income must remain the
same.
 The price of the related commodities
should not change.
 The commodity should be a normal
commodity
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LAW OF DEMAND
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Other things being equal, if the price of the
commodity falls , the quantity demanded of it
will rise, and if the price of the commodity
rises, its commodity demanded will decline.
Hence there is inverse relationship between
price and quantity demanded, other things
remaining the same (ceterus paribus).
Demand Curve
•
Demand Curves – A demand curve is a
graphical depiction of the law of
demand. The picturization or the
plotting of the demand schedule is
called the demand curve. It is the curve
showing different quantities demanded
at alternative prices.
Demand Curve

The demand curve slopes downwards from left to right which
indicates that there is an inverse relationship between price and
quantity demanded.
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Demand Schedules for Apples
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Price/kg
30
25
20
15
10
Demand-A
4
6
9
13
17
Demand-B
3
5
8
12
15
Market(A+B)
7
11
17
25
32
UTILITY
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Utility theory:
 Very abstract but helps understanding many
societal issues
 What we are willing to pay for a product or a
services depends on how satisfied we feel when
consuming the product.
What is utility
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Ability of a product / service to satisfy a
person's wants. i.e. It is a measure of satisfaction
Def:
Problem: to maximise society’s utility must
quantify satisfaction gained from consumption
and there is no such measure. But for our
example, we will use the imaginary unit of
measure called UTILS
Utility

Utility refers to want satisfying power
of a commodity.

In objective terms, utility may be
defined as the “amount of satisfaction
derived from a commodity or service at
a particular time”.
Assumptions:
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Utility can be measured.
Marginal Utility of money remains
constant
No change in income of the consumer,
his taste & fashion to be constant
No substitute
Independent marginal utility of each
unit of commodity
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Constancy of Marginal Utility of Money
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Introspective Method-It’s the ability of
the observer to reconstruct events
which go in the mind of another person
with the help of self observation.
Utility theory cont.
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Law of diminishing marginal utility:
As more of a product is consumed, the
marginal utility gained from its consumption
will drop.
Aside: Though generally more is better, the
more of something we have the more
satisfied we feel when it comes to that
particular
good or service: like
quenching a thirst.
Marginal Utility (MU)
The word Marginal means “Border”
or “Edge”.
 It is the addition made to the total
utility by consuming one more unit
of a commodity.
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Q_X
TU_X
MU_X
0
0
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1
8
8
2
14
6
3
18
4
4
20
2
5
20
0
6
18
-2
Total and Marginal Utility
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Total utility (TU): total utils a consumer derives from consuming
products and services.
Marginal utility (MU): additional utility that one gets from
consumption of the last unit consumed at a particular time.
Curve of TU : Change in TU = MU
Change in Q
TU
MU
A
A
Q
Q