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Demand

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.

demand

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.

demand

or

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 ?
the cross price elasticity will be positive because the goods are substitutes: Because they compete in the market, a rise in the price of margarine, which makes butter cheaper relative to margarine, leads to an increase in the quantity demanded (Because the demand curve for butter will shift to the right, the price of the butter will rise).
49) write, "the cross price elasticity of demand for chicken with respect to beef is positive indicates that as the price of beef goes up, the quantity of chicken demanded goes up ...
where [q.sub.i] is the quantity demanded of individual i, Q is market demand, and P is market price.
Some consumers would prefer an increase in price (for example, road tolls, admission fees, user fees, and club membership), and would increase quantities demanded afterward.
where [q.sub.d] is the quantity demanded, [x.sub.1] is the own price of a good and the bars above the other included variables (such as prices of related goods, income, and taste) show that they are being held constant.
The auction begins as the Treasury calls out a price and all interested parties submit their quantity demanded. With quick tabulation, the volume of bids at that price is announced and, in successive rounds, the price is raised until the volume demanded is smaller than the size of the issuance.
Hence, to the extent that there are more resources demanded in an economy than are available to be financed, interest rates will rise until sufficient excess demand is finally crowded out.