Recent from talks
Demand
Knowledge base stats:
Talk channels stats:
Members stats:
Demand
In economics, demand is the quantity of a good that consumers are willing and able to purchase at various prices during a given time. In economics "demand" for a commodity is not the same thing as "desire" for it. It refers to both the desire to purchase and the ability to pay for a commodity.
Demand is always expressed in relation to a particular price and a particular time period since demand is a flow concept. Flow is any variable which is expressed per unit of time. Demand thus does not refer to a single isolated purchase, but a continuous flow of purchases.
The factors that influence the decisions of household (individual consumers) to purchase a commodity are known as the determinants of demand. Some important determinants of demand are:
The price of the commodity: Most important determinant of the demand for a commodity is the price of the commodity itself. Normally there is an inverse relationship between the price of the commodity and its quantity demanded. It implies that the lower the price of the commodity, the larger is the quantity demanded and the higher the price, the lesser is the quantity demanded. This negative relationship is embodied in the downward slope of the consumer demand curve. The assumption of an inverse relationship between price and demand is both reasonable and intuitive. For instance, if the price of a gallon of milk were to increase from $5 to $15, this significant price rise would render the commodity unaffordable for some consumers, thereby leading to a decrease in demand.
Price of related goods: The principal related goods are complements and substitutes. A complement is a good that is used with the primary good. Examples include hotdogs and mustard, beer and pretzels, automobiles and gasoline. (Perfect complements behave as a single good.) If the price of the complement goes up, the quantity demanded of the other good goes down.
Mathematically, the variable representing the price of the complementary good would have a negative coefficient in the demand function. For example, Qd = a - P - Pg where Q is the quantity of automobiles demanded, P is the price of automobiles and Pg is the price of gasoline. The other main category of related goods are substitutes. Substitutes are goods that can be used in place of the primary good. The mathematical relationship between the price of the substitute and the demand for the good in question is positive. If the price of the substitute goes down the demand for the good in question goes down.
Income of the Consumer: Income of the consumer is the basic determinant of the quantity demanded of a product as it determines the purchasing power of the consumer. Generally, there is a direct relationship between the income of the consumer and his demand for a product, i.e., with an increase in income, the demand for the commodity increases. However, this may not always be the case.
Consumers' Tastes or Preferences: The greater the desire to own a good the more likely one is to buy the good. There is a basic distinction between desire and demand. Tastes and preferences depend on social customs, habits of the people, fashion, general lifestyle of the people, advertisement, new inventions, etc. Some of these factors like fashion keep on changing, leading to change in consumers' tastes and preferences. As a result, the demand for different goods changes.
Hub AI
Demand AI simulator
(@Demand_simulator)
Demand
In economics, demand is the quantity of a good that consumers are willing and able to purchase at various prices during a given time. In economics "demand" for a commodity is not the same thing as "desire" for it. It refers to both the desire to purchase and the ability to pay for a commodity.
Demand is always expressed in relation to a particular price and a particular time period since demand is a flow concept. Flow is any variable which is expressed per unit of time. Demand thus does not refer to a single isolated purchase, but a continuous flow of purchases.
The factors that influence the decisions of household (individual consumers) to purchase a commodity are known as the determinants of demand. Some important determinants of demand are:
The price of the commodity: Most important determinant of the demand for a commodity is the price of the commodity itself. Normally there is an inverse relationship between the price of the commodity and its quantity demanded. It implies that the lower the price of the commodity, the larger is the quantity demanded and the higher the price, the lesser is the quantity demanded. This negative relationship is embodied in the downward slope of the consumer demand curve. The assumption of an inverse relationship between price and demand is both reasonable and intuitive. For instance, if the price of a gallon of milk were to increase from $5 to $15, this significant price rise would render the commodity unaffordable for some consumers, thereby leading to a decrease in demand.
Price of related goods: The principal related goods are complements and substitutes. A complement is a good that is used with the primary good. Examples include hotdogs and mustard, beer and pretzels, automobiles and gasoline. (Perfect complements behave as a single good.) If the price of the complement goes up, the quantity demanded of the other good goes down.
Mathematically, the variable representing the price of the complementary good would have a negative coefficient in the demand function. For example, Qd = a - P - Pg where Q is the quantity of automobiles demanded, P is the price of automobiles and Pg is the price of gasoline. The other main category of related goods are substitutes. Substitutes are goods that can be used in place of the primary good. The mathematical relationship between the price of the substitute and the demand for the good in question is positive. If the price of the substitute goes down the demand for the good in question goes down.
Income of the Consumer: Income of the consumer is the basic determinant of the quantity demanded of a product as it determines the purchasing power of the consumer. Generally, there is a direct relationship between the income of the consumer and his demand for a product, i.e., with an increase in income, the demand for the commodity increases. However, this may not always be the case.
Consumers' Tastes or Preferences: The greater the desire to own a good the more likely one is to buy the good. There is a basic distinction between desire and demand. Tastes and preferences depend on social customs, habits of the people, fashion, general lifestyle of the people, advertisement, new inventions, etc. Some of these factors like fashion keep on changing, leading to change in consumers' tastes and preferences. As a result, the demand for different goods changes.