In economics, demand refers to the consumer's willingness and ability to purchase goods and services at different prices during a specific time period. It is not just the desire to buy something but also the financial capacity to do so. Demand typically varies inversely with price; when prices rise, the quantity demanded usually falls, and when prices fall, demand typically increases. This relationship is summarized by the law of demand. Key points about demand:
- It reflects both the willingness and ability of consumers to pay for goods or services.
- Demand is influenced by factors such as price, consumer income, preferences, prices of substitutes, and expectations of future prices.
- The demand curve is a downward-sloping graph showing how quantity demanded changes with price.
- Market demand is the total amount demanded by all consumers in a market.
- Understanding demand helps businesses set prices, plan production, and manage inventory, and helps policymakers anticipate economic trends.
In essence, demand captures how much of a product consumers want to buy at various price points, and this guides economic decisions in markets. The concept is fundamental to how prices are determined and how resources are allocated in an economy.
