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The need or desire for a good, service, or asset among consumers at a given price. The amount of demand at a given price is determined by supply and the availability of similar or replacements goods and services, among other factors. While demand for some staple products is relatively constant regardless of price, most of the time the price has a large influence on the level of demand. Demand for a good or service tends to increase as its price decreases. See also: Law of supply and demand, Demand curve.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


the amount of a product which is purchased at a particular price at a particular point in time. A demand curve is a line showing the relationship between the price of a product and the quantity demanded per time period over a range of possible prices. Demand curves are usually downward sloping, indicating that as the price of the product falls, more is demanded. The extent to which the demand for a product will increase as price falls (and the extent to which demand will drop if the price rises) depends on the product's price-ELASTICITY OF DEMAND. The demand for a product, however, is determined also by a variety of non-price factors. A demand function attempts to incorporate all the factors that have a statistically. significant influence on demand for example, consumers' incomes, the prices of substitute products, advertising, etc. Demand curves will shift if any of these factors change over time.

In practice, firms are unable to derive definitive demand curves because of incomplete information. For this reason many firms use a COST-BASED PRICING formula for determining prices, but allow for the influence of demand by varying the profit mark-up (see DEMAND-BASED PRICING, COMPETITION-BASED PRICING).

There are various methods a firm can use to ‘forecast’ demand, including time series analysis, barometric indicators and econometric models. See SALES FORECASTING.

Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson



effective demand

the WANT, need or desire for a product backed by the money to purchase it. In economic analysis, demand is always based on ‘willingness and ability to pay’ for a product, not merely want or need for the product. CONSUMERS’ total demand for a product is reflected in the DEMAND CURVE. Compare SUPPLY.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
He acknowledged that expenditure by the wealthy on luxuries would create some employment and generate some effective demand and wealth, but this would not be sufficient to promote general economic growth, because 'their inconsiderable numbers would have prevented their demand from producing any great mass of such wealth'.
Kalecki, notably, remarked that she did not foresee the boost to effective demand that would come in the decades succeeding her death from the growth in state --not least military--expenditure (this is neatly summed up in Kolakowski, 1981, 73-4).
The estimated nutrient price elasticities indicate that (1) the price of millet sorghum has a statistically significantly negative and less than proportionate effect on the effective demand for nutrients in any given season; (2) the price of dry fish has a negative and statistical significant effect on the amounts of calcium demanded by households; (3) the price of green leaves has a negative statistically significant impact on the demand for calcium and vitamin A; and (4) the price of rice and beef have a statistically significant effect on the availability of calories and nutrients during the lean season, and for the pooled data.
And if most people have less, they obviously spend less, and people who sell find fewer people who buy - that is, lower effective demand. So production is still less profitable (returns from stocks) and governments are still poorer.
The white paper, "Effective Demand Planning," can be downloaded from
Despite the rather profound divergences in methodological approaches among Marx, Keynes and Kalecki, Sardoni argues that there is a common lineage linking these authors in relation to their respective analyses of the problems of unemployment, investment and effective demand. Sardoni argues that Kalecki's contribution to the theory of effective demand is quite seminal and represents a possible 'bridge' between the Marxian and Keynesian traditions.
1920) is served by six papers on theories of effective demand and employment, the estimation of distributed lags, and other topics.
* Susanto Basu, Boston College and NBER, and Brent Bundick, Boston College, "Uncertainty Shocks in a Model of Effective Demand"
"Given this scenario, we would expect effective demand management to play a key role in the energy balance of GCC countries, and this is already happening.
We intend to reinvest up to half of the savings in our brand and in more effective demand creation initiatives.

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