ABSTRACT
Demand theory studies the factors affecting the demand of buyers, and how these factors influence demand. Economics assumes that people consume in order to increase their utility. This is the basic assumption of the economic theory of demand. The demand theory assumes that purchasing something results in consumption and this consumption increases utility. In demand theory, consumers are assumed to derive utility from consumption. The theory assumes a specific functional relation to exist between consumption and utility. Economic theory defines goods and services to be the source of utility for consumers. Goods and services are bought to satisfy the needs. In economic theory, the production of goods and services is realized by the factors of production. Production units may be people, firms, or companies. Economic theory defines the production process as a "production function". There are two kinds of inputs to the production relation: the material inputs and the factor inputs.
