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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.


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.



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.
References in periodicals archive ?
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).
And if most people have less, they obviously spend less, and people who sell find fewer people who buy - that is, lower effective demand.
Sardoni argues that, by abandoning the assumption of free competition and adopting a theory of imperfect competition based upon a 'profit mark-up' approach and the 'degree of monopoly', Kalecki provides a more coherent set of micro-foundations in analysing the macroeconomic problems of unemployment and effective demand.
The first of three more technical papers, Chapter 9 is authored by Colin Rogers, who provides a more detailed and very readable study of the place and importance of the effective demand principle within the General Theory.
Malthus, indeed, had vehemently opposed Ricardo's doctrine that it was impossible for effective demand to be deficient; but vainly.
Even if a competitive economy with perfectly flexible money wages and prices existed, there was no automatic market mechanism that could restore the full employment level of effective demand.
After Keynes's triumph, economists forgot about banking and credit cycles and modelled every crisis as a result of lack of effective demand to be cured by fiscal action.
the working of the principle of effective demand will compel it to reduce its actual output, until, in spite of its potential wealth, it has become so poor that its surplus over its consumption is sufficiently diminished to correspond to the weakness of the inducement to invest (p31).
The Government can create effective demand for steel with investment programmes, but the Government has continued Thatcher's hostility to public ownership and a policy of de-industrialisation in favour of making the service industries the foundation of the British economy.
Sgouridis called for effective demand management by pricing energy to reflect its true cost of production as well as the pollution resulting from its use.
On the LDP's crushing defeat, Yosano said one of the main reasons he sees for it is that the government failed to provide financial support to create effective demand in Japan's regional economies.

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