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Demand

  • Date Submitted: 05/26/2011 09:38 AM
  • Flesch-Kincaid Score: 59.9 
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In economics, demand is the desire to own anything, the ability to pay for it, and the willingness to pay[1] (see also supply and demand). The term demand signifies the ability or the willingness to buy a particular commodity at a given point of time.
Economists record demand on a demand schedule and plot it on a graph as a demand curve that is usually downward sloping. The downward slope reflects the relationship between price and quantity demanded: as price decreases, quantity demanded increases. In principle, each consumer has a demand curve for any product that he or she would consider buying, and the consumer's demand curve is equal to the marginal utility (benefit) curve. When the demand curves of all consumers are added up, the result is the market demand curve for that product. If there are no externalities, the market demand curve is also equal to the social utility (benefit) curve.
Elements of the Law of Demand As Melvin and Boyes note the law of demand is defined as:
  1. The quantity of a well-defined good or service that:
  2. People are willing and able to buy.
  3. During a particular period of time.
  4. Decreases/increases as the price of that good or service rises/falls
  5. All other factors remain constant.
Melvin and Boyes (2010)
Demand is a relationship between two variables, price and quantity demanded, with all other factors that could affect demand being held constant.
'well defined'- The key phrase in the first element is “well defined”. The purpose of the phrase is to ensure that we are examining the relationship between price and quantity demanded for the same good. If we are interested in demand for a particular good there is no reason to compare the relationship between the price of the good and the change in quantity demanded of a different goods. Goods are well defined if they share the same characteristics - brand, model, age, quality and performance to name a few. For example a Cadillac CTS-V is a high performance...

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