Demand is the basis of the economy
Each person has needs for the acquisition of certain goods, and for this he must have money, because there is nothing free on the market. It is money that turns demand into demand. This is an economic term that is displayed in a curve.
What is demand?
Demand is the desire to buy goods in a certain quantity and at a specific price for a while. In order for it to be, there must be desire and opportunity. There is the concept of "quantity of demand" or, in other words, "volume of demand" - this is how much the consumer wants and can buy for a certain price and at a given time.
Kinds of demand
1. Individual - this is the demand of an individual or a subject of the economy.
2. Aggregate - the volume of total demand for a particular product at the level of the entire economy.
In turn, individual demand is everyday (for goods consumed daily by a person) and periodical (for non-essential goods).
What affects the demand
There are factors that influence demand, changing its size and dynamics. Here they are:
- Prices that are in the first place among all the factors that are predictable and most consistently affecting demand. So, at a high price, its value decreases, and when the price of a product goes down, it increases. This is called the law of demand.
- Preferences, tastes, fashion - these are the factors through which the need for a product is expressed. The same product from one person may cause the desire to buy it, but the other - no.
- The number of customers - the number of people who want and can buy goods. If there are a lot of buyers, then the demand will be excessive, if it is small, then it is insignificant.
- Incomes of people (buyers). Growth in buyers' income may lead to an increase in demand for more expensive goods, but a decrease in cheap ones. However, in general, as income rises, so does demand.
- Prices for substitute or complement goods. If the price of a product has risen, people will buy less of it, but will purchase a product that replaces the first (less expensive) one. The demand for a product that is impossible without the other, complementing it, depends on the price of the first.
- Buyer expectations are a situation in which they, waiting for the goods to disappear, begin to buy it (regardless of the price), and vice versa, the demand drops when buyers know about the upcoming price reduction.In order to show how the quantity of demand changes depending on the price, a curve is used, each point of which determines how much goods are sold (or will be sold) at a certain price on it. So, demand is a quantity that tends to change.
In economics, there is such a term as "investment demand." This planning and the desire of firms to replenish their capital. This is the main factor determining the final demand. Firms seek to make investments in order to obtain additional profit, that is, an increase in investment demand allows them to increase income (profit) by increasing the amount of capital used. Investment income is expressed as a percentage of their costs. It is equal to the ratio of the difference between profit growth and the volume of investments to the volume of investments.