Written by Fmi.Online Friday January 6, 2023
Demand is an economic term that refers to the amount of products or services that consumers wish to purchase at any given price level. The mere desire of a consumer for a product is not demand. Demand includes the purchasing power of the consumer to acquire a given product at a given period. In other words, it’s the amount of products or services that consumers are willing and able to purchase. The factors of demand for given products or services is related to:
  1. The price of the good or service
  2. The income level
  3. The prices of complementary products
  4. The prices of substitute products
  5. Consumer preferences
  6. Consumption patterns


It is also related to the quantity supplied, which is expected to meet demand so that demand and supply are in equilibrium. Consumers seek utility maximization, which is the satisfaction they derive from using a given product or service for a given period while paying the lowest price. Therefore, the demand for a given product or service is determined by consumer purchasing behavior, which involves consumer preferences, intentions, and decisions. Consumer purchasing behavior is related to consumer income and the prices of goods and services. Different income levels determine diverse quantities demanded of the same product or service, reflecting the purchasing power of consumers and the apprehended utility. Remember that just because a consumer wants a product, it doesn’t mean they are increasing the economic demand. If more low income people want to purchase a Lamborghini, it doesn’t increase the D because they don’t have the ability to purchase one.

In a nutshell:

  • Demand theory describes the way that changes in the quantity of a good or service demanded by consumers affects its price in the market,
  • The theory states that the higher the price of a product is, all else equal, the less of it will be demanded, inferring a downward sloping demand curve.
  • Likewise, the more demand that occurs, the greater the price will be for a given supply.
  • Demand theory places primacy on the demand side of the supply-demand relationship.
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