Demand

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    Demand

    • Demand is what consumers want
    • However, what consumers want and what they demand are not the same thing for two reasons
      • Wants are unlimited. We would always like to consume more or consume things we aspire to e.g. Rolex watches
      • Demand is that to consume a product, customers must have the ability to pay.
      • They must be able to afford what they demand
    • The distinction can be made clear between wants and demand with the introduction of the terms notional and effective demand. The former being like wants.

     

    • The definition of demand – effective demand – assumes that all other factors that affect the demand of the product don’t change
      • e. any changes in the quantity demanded are due to the price of the product alone.
      • This is referred to as ceteris paribus
    • As defined, the quantity demanded must be time related in the sense that it needs to be specified over a day, week, etc.
    • If sales for holidays were for a given week, then the quantity demanded would clearly be lower than for annual sales.

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