Demand
- Demand is what consumers want
- However, what consumers want and what they demand are not the same thing for two reasons
- Wants are unlimited. We would always like to consume more or consume things we aspire to e.g. Rolex watches
- Demand is that to consume a product, customers must have the ability to pay.
- They must be able to afford what they demand
- The distinction can be made clear between wants and demand with the introduction of the terms notional and effective demand. The former being like wants.
- The definition of demand – effective demand – assumes that all other factors that affect the demand of the product don’t change
- e. any changes in the quantity demanded are due to the price of the product alone.
- This is referred to as ceteris paribus
- As defined, the quantity demanded must be time related in the sense that it needs to be specified over a day, week, etc.
- If sales for holidays were for a given week, then the quantity demanded would clearly be lower than for annual sales.