Demand
Demand refers to the quantity of a good or service that consumers are willing and able to purchase at various prices during a specific period. It is influenced by factors such as consumer preferences, income levels, and the prices of related goods. The law of demand states that as the price of a good decreases, the quantity demanded increases, and vice versa.
8 Key excerpts on "Demand"
eBook - ePub- Andrew Barkley, Paul W. Barkley(Authors)
- 2016(Publication Date)
- Routledge(Publisher)
...This topic is further explored in Chapter 16. 9.4.5 Population Although the list could be expanded, population is the final determinant of Demand mentioned here. Population growth has a direct and important impact on consumption. More people will buy more goods, particularly necessities such as food. The result is similar to an increase in income in low-income nations. If the population of Ethiopia increases, then Ethiopia’s Demand for wheat will increase: if the population of Ethiopia increases, the country’s Demand for food will rise. The last few pages have dealt with the determinants of Demand. Chapter 10 uses much of this information to explain how markets operate. The supply and Demand curves from Chapter 8 and this chapter merge into one graph, to aid the study of the interaction between producers and consumers. 9.5 Summary Demand is the consumer willingness and ability to pay for a good. The Demand curve is a function connecting all combinations of prices and quantities consumed for a good, ceteris paribus. The Demand schedule presents information on price and quantities purchased. The market Demand curve is the horizontal summation of all individual Demand curves. The law of Demand states that the quantity of a good Demanded varies inversely with the price of a good, ceteris paribus. The price elasticity of Demand relates how responsive quantity Demanded is to changes in price [E d = %ΔQ d /%ΔP]. An inelastic Demand curve is one where a percentage change in price results in a relatively smaller percentage change in quantity Demanded (|E d | < 1). An elastic Demand is one where a percentage change in price results in a larger percentage change in quantity Demanded (|E d | > 1)...
eBook - ePubConceptualising Demand
A Distinctive Approach to Consumption and Practice
- Jenny Rinkinen, Elizabeth Shove, Greg Marsden(Authors)
- 2020(Publication Date)
- Routledge(Publisher)
...For now it is enough to notice that economic theories tend to 1) treat supply and Demand as abstract concepts, 2) suppose that Demand exists independent of the ways in which it is met, 3) equate consumption – that is the acquisition and use of goods and services with Demand and 4) suggest that there are identifiable and also generic drivers of Demand, including price and consumer preference. In the next section we take stock of social scientific interpretations of Demand that focus on the social and cultural meaning of consumption, and the constitution of needs, wants and desires. Demand is a consequence of consumers’ needs, wants and desires In market studies, as in much consumer research, ‘consumption’ is often equated with the decision or commitment to buy. In this context, consumption is taken to be an expression of individual choice, based on the ambition of satisfying needs and meeting desires and wants, limited or enabled by a willingness or ability to pay. In such representations, Demand (here meaning the act of purchasing) depends on more than price since the consumer ‘experience’ includes aspects of imagination, emotion and evaluation (Holbrook and Hirschman, 1982). Despite these additional complexities, there is considerable overlap with economic theories of Demand, including a shared focus on the decisions and actions of more or less rational individual consumers (McCracken, 1990). For example, approaches stemming from theories of planned behaviour (Ajzen, 1991) suppose that consumer choices are driven by individual attitudes, and that changing patterns of consumption is in essence a matter of changing peoples’ environmental values (for a critique see Shove, 2010). The idea that individuals act in ways that reflect and that are driven by their beliefs and attitudes is a staple feature of well-established and essentially psychological theories of behaviour. It is also a view that is widely shared in policy and in popular discourse as well...
eBook - ePub- Tom Craig, David Campbell(Authors)
- 2012(Publication Date)
- Routledge(Publisher)
...The Market System Supply and Demand DOI: 10.4324/9780080454603-17 Learning Objectives After studying this chapter, students should be able to describe: the features and determinants of Demand; what is meant by the Demand schedule and the Demand curve; the features and determinants of supply; what is meant by the supply schedule and the supply curve; the mechanisms of price determination and disequilibrium; the principles of price and income elasticities of Demand; the principles of cross elasticity of Demand; the features of factor markets, particularly the labour market. 17.1 Demand Demand and Effective Demand Whenever we express an interest in purchasing a good or service, we are indicating a Demand. Note though, that it is possible to Demand a product without actually buying it. You may Demand a new motorcar, but for various reasons (e.g. poverty), you are unable to express your Demand in the form of a purchase. It is for this reason that economists distinguish desire for a product with its effective Demand. Producers of goods and services are less concerned with how badly you desire their products, and more with how many you will actually buy and at what price. Effective Demand, as distinct from Demand, has three components: the actual quantity Demanded of a good or service, the time period over which the quantity is Demanded, the price at which the quantity will be Demanded over the time period. Effective Demand thus takes into account the customer’s ability to buy, not just the desire – however intense that may be. We may say, therefore, that the total Demand for product A is 10,000 units a month if the price is 45 pennies per unit. Thus all three components must be in place before the Demand can be said to be effective. The Determinants of Demand In seeking to answer the question why the Demand for a product is as it is, we must explore the reasons behind consumer choices...
eBook - ePub- Milton Friedman(Author)
- 2017(Publication Date)
- Routledge(Publisher)
...This is primarily a case of division of labor. The economist has little to say about the formation of wants; this is the province of the psychologist. The economist’s task is to trace the consequences of any given sets of wants. The legitimacy of and justification for this abstraction must rest ultimately, as with any other abstractoin, on the light that is shed and the power to predict that is yielded by the abstraction. A basic distinction in the theory of Demand is between “Demand” in the schedule sense and “Demand” in the sense of quantity Demanded. The harm that can be done by confusing these two senses of the term Demand is suggested by such statements as: (1) “The price went up and therefore Demand went down,” and (2) “Demand went up and therefore price went up.” Each statement separately seems sensible, yet the two are clearly contradictory if the word Demand is supposed to have the same meaning in both. Of course it does not; in (1) it means “quantity Demanded,” in (2), “Demand schedule.” Subsequently, the word Demand will be used only when reference is being made to the Demand schedule; and the words quantity Demanded will be used when reference is being made to a particular quantity. To bring out the distinction more clearly, consider the following proposition: “A change in the price of butter may affect the Demand for oleomargarine; it does not affect the Demand for, but only the quantity Demanded, of butter.” A Demand curve of a particular group for a particular commodity can be defined as a locus of points, each of which shows the maximum quantity of the commodity that will be purchased by the group per unit time at a particular price. It represents an attempt to relate a rate of flow to a price at an instant of time...
eBook - ePub- Rob Dransfield(Author)
- 2013(Publication Date)
- Routledge(Publisher)
...The relative strength of Demand and supply determines the market prices of goods. Market prices act as signals to producers about the strength of Demand for the products they supply. Rising prices act as an incentive for producers to produce more of certain types of goods. In contrast, falling prices will encourage consumers to buy more goods as they become relatively cheaper. Gaining a clear understanding of the four laws of Demand and supply will enable you to have a good grasp of how the market works. Key Term Changes in Demand and shifts in Demand – economists distinguish between a ‘change’ in ‘Demand’ (where the whole Demand curve changes its position, e.g. as a result of a change in tastes or incomes), and ‘changes’ in ‘quantity Demanded’ (i.e. movements along a given Demand curve). Changes in quantity Demanded result from a change in the price of the good whose Demand is being examined. 3.4 The construction of Demand and supply curves Demand and supply curves A Demand curve is used by economists to illustrate the relationship between price and quantity Demanded. It shows Demand and changes in quantity Demanded. It is useful for business organizations trying to predict the effect of different prices on Demand for their products. It helps them to decide how much of a good to make in order to meet quantity Demanded. Common sense and personal experience explain the shape of the Demand curve. The curve slopes down from left to right because more people can afford to buy goods at lower rather than at higher prices...
eBook - ePubEconomics for Investment Decision Makers
Micro, Macro, and International Economics
- Christopher D. Piros, Jerald E. Pinto(Authors)
- 2013(Publication Date)
- Wiley(Publisher)
...Alternatively, when the quantity that buyers are willing and able to purchase at a given price is just equal to the quantity that sellers are willing to offer at that same price, we say the market has discovered the equilibrium price. So equilibrium price and quantity are achieved simultaneously, and as long as neither the supply curve nor the Demand curve shifts, there is no tendency for either price or quantity to vary from its equilibrium value. 3.1. The Demand Function and the Demand Curve We first analyze Demand. The quantity consumers are willing to buy clearly depends on a number of different factors, called variables. Perhaps the most important of those variables is the item’s own price. In general, economists believe that as the price of a good rises, buyers will choose to buy less of it, and as its price falls, they buy more. This is such a ubiquitous observation that it has come to be called the law of Demand, although we shall see that it need not hold in all circumstances. Although a good’s own price is important in determining consumers’ willingness to purchase it, other variables also have influence on that decision, such as consumers’ incomes, their tastes and preferences, the prices of other goods that serve as substitutes or complements, and so on. Economists attempt to capture all of these influences in a relationship called the Demand function. (In general, a function is a relationship that assigns a unique value to a dependent variable for any given set of values of a group of independent variables.) We represent such a Demand function in Equation 1-1 : (1-1) where represents the quantity Demanded of some good X (such as per-household Demand for gasoline in gallons per week), P x is the price per unit of good X (such as $ per gallon), I is consumers’ income (as in $1,000s per household annually), and P y is the price of another good, Y...
eBook - ePubMicroeconomics
A Global Text
- Judy Whitehead(Author)
- 2014(Publication Date)
- Routledge(Publisher)
...These other factors being held constant are referred to as shift factors. Changes in price are reflected in movements along the Demand curve. Changes in the other factors which affect Demand, such as income, taste or preferences and the price of other goods, are reflected in a shift in the Demand curve. These shift factors affect the position of the Demand curve. Demand is also affected inter alia by: The availability of credit The nature of the distribution of income Market size Accumulated wealth or affluence of the population Cultural habits and behaviour External influences from foreign media such as television and the internet (demonstration effect) The consumption behaviour of others in the market (see Bandwagon, Snob and Veblen effects in Chapter 4). 3.1.1 Derivation of market Demand The market Demand for a given commodity is simply the horizontal summation of the Demands of the individual consumers. Consider a market with n consumers. The market Demand is the horizontal summation of the Demand curves of all n consumers. This is illustrated for two consumers (A and B) in Figure 3.1. It should be recognized that, although for one consumer a good may be a Giffen good (i.e. with a positively sloped Demand curve), the market Demand will still have the normal negative slope unless it is a Giffen good for a large enough number of consumers in that market. Figure 3.1 Horizontal summation of individual Demands to give market Demand 3.1.2 Shape of the Demand curve The Demand curve is usually drawn as a straight line (linear Demand curve). However, it may also take the form of a curve, usually one that is convex to the origin. The linear Demand curve The linear Demand function, expressing the relationship between the quantity Demanded (Q) and the price (P) of a commodity may be written as: where, It is important to understand that, while the Demand function is written with quantity (Q) as a function of price (P), it is drawn with price (P) as a function of quantity (Q)...
eBook - ePub- Enrico Colombatto(Author)
- 2016(Publication Date)
- Routledge(Publisher)
...For example, one must have some information about the shape of the Demand curve/region in order to assess the effects of a tax (see Chapter 6). Demand analysis explains why governments are inclined to tax goods with steep Demand curves, so that consumers will keep buying the taxed commodity (and pay the tax) – as happens in the case of petrol/gasoline. Similarly, innovative producers strive to guess the shape and the position of the latent Demand for new products, which might be steep (‘price inelastic’, according to the economic jargon) when a successful product is introduced, but might well rotate and become flat (‘price elastic’) as soon as imitations and substitutes follow. The thinking tools typical of traditional Demand analysis can also be applied to related domains and contribute powerfully to a better understanding of areas in which common sense and intuition might not suffice. To illustrate this point, the next sections will examine three new issues: intertemporal choices, interest rates and happiness. 2.6 Intertemporal consumption and the rate of interest Demand curves are traditionally conceived in terms of goods and services. This is sensible, since these are the kinds of choices individuals face every day. When individuals engage in consumption, they are fairly aware of what they can afford to spend over a given period (a month, a year), and their task consists in distributing the budget at their disposal across a set of desirable items. Yet, the individual's expenditure budget over a given period is itself the result of a choice. For example, one could decide to spend all the money one earns immediately, day after day, month after month. Most frequently, however, current expenditure differs from current income. In particular, it might happen that one wants to consume in excess of his current income and thus plans to cover the difference by borrowing or by drawing on past savings...
