What is Demand?
In economic terms, demand refers to the total quantity of a specific product or service that consumers are willing to buy at a given rate or price. Demand is important in determining the price of products and services in a market. Besides cost, demand for a product or service depends on several factors. These include availability of complementary or substitute products in the market. In exceptional cases, the demand for a product may not be related to its price at all. Economists define demand in terms of a buyer’s desire to own a product or service with the required purchasing power to complete a binding transaction.
Demand does not imply the amount that a consumer wishes to acquire such as 6 paw paws. Rather, demand refers to the complete relationship existing between the sum total of a desired product and all probable costs charged for that product. The precise amount of products desired at a specified price is referred to as quantity demanded. Ideally, quantity demanded is restricted to a given timeframe. For instance, when the cost of a paw paw is 10 cents, the quantity demanded in a week is 600 paw paws. Based on the probable product price, one can develop a demand program to show the quantities demanded at different prices. Essentially, the lower the price the higher the quantity demanded.
When plotted on a graph, a demand curve slopes downwards because consumers often purchase more units of a product or service when the cost is low. The demand curve obeys the demand law which states the amount of a product or service demanded increases as the cost decreases. This shows how susceptible the quantity demanded is to shifts in price. This sensitivity of quantity to price is known as price elasticity.