Definition:
Demand is a way of expressing a consumer’s capacity and willingness to purchase things (goods or services) at a specific price at a particular time.
What is demand?
Demand refers to a consumer’s capacity and desire to make a purchase of a good or service. The desire of all customers in the economy to purchase a certain good or service, such as a new phone or getting a manicure, is measured as market demand by economists.
The economy’s overall demand for all goods and services at any one time is known as aggregate demand. Economists can get a broad notion of the country’s level of consumer activity from aggregate demand.
Curve of market demand
The demand-price connection for a good or service is depicted graphically by the market demand curve. The price is tracked on the vertical y-axis, while the quantity is tracked on the horizontal x-axis. The market demand curve typically slopes downward and to the right. The curve’s form demonstrates that when a product’s price reduces, people are more inclined to purchase it.
Remember that the sole element impacting demand on the market demand curve is price. We assume that all other variables remain constant (or, as economists often say, “ceteris paribus”).
In fact, a variety of different situations and factors, such as a shift in a consumer’s income or tastes, can alter demand. These variables frequently affect the market demand curve as a whole, shifting it to the left or right rather than pushing it along.
Demand vs. Demanded Quantity
Demand is an assessment of how eager consumers are to pay overall at various prices. The quantity of demand, however, is desire at a specific price.
Using a demand curve is one technique to separate them. The demand curve moves whenever there is a change in the level of demand. Yet, the entire demand curve shifts to the left or right when there is a change in total demand.
When the cost of an item or service varies, the level of demand also changes. Yet, the shift in general demand often has an impact on something other than the price. These additional elements are mentioned by economists as demand determinants.
Demand-side determinants
The factors that influence a consumer’s decision to buy a good or service are known as demand determinants. Although economists disagree on the precise number of determinants, they often include factors such as:
- Costs of comparable or replacement products or services
- Anticipated price rises
- Income from consumers and wealth
- Anticipated increases in income and wealth
- Consumer inclinations
- The size and makeup of the population
Let’s use the cost of comparable or replacement goods or services as an example of one of the factors.
Let’s say a rival tech company releases a handy electric kettle with additional features at a lower cost, and this product quickly gains popularity in the market of kitchen equipment. Less people are now ready to pay more for kettles that were previously offered on this market. When there is less demand, the demand curve moves to the left.