Sunday, March 15, 2020
Introduction to Demand in Economics
Introduction to Demand in Economics In general, to demand means to ask for urgently. That said, the concept of demand takes on a very particular, and somewhat different, meaning in economics. Economically speaking, to demand something means to be willing, able and ready to purchase a good or service. Lets examine each of these requirements in turn: Willing to purchase- Being willing to purchase simply means that one likes an item enough to want to buy it, and this is usually what people think of when they encounter the concept of demand. However, its important to remember that, while its good to want things, desire to purchase is not the only requirement for economic demand.Able to purchase- Wanting to purchase an item doesnt mean a whole lot if one doesnt have the means to make the transaction happen. Therefore, the ability to purchase is another important factor in demand. Economists dont specify how an individual must be able to pay for an item- he can pay with cash, check, credit card, money borrowed from friends or taken from the piggy bank, etc.Ready to purchase- Demand is, by its nature, a current quantity, so an individual is only said to demand something if he is willing and able to purchase it now as opposed to some point in the future. Putting these three requirements together, it is reasonable to think of demand as answering the question If a seller were to show up right now with a whole truckload of the item in question, how much would an individual purchase? Demand is a pretty straightforward concept, but there are a few other things to keep in mind. Individual vs. Market Demand Not surprisingly, demand for any given item varies from person to person. Nonetheless, market demand can be constructed by adding together the individual demands of all of the buyers in a market. Implicit Time Units It doesnÃ¢â¬â¢t really make sense to describe demand without time units. For example, if someone asked Ã¢â¬Å"how many ice cream cones do you demand?Ã¢â¬ you would need more information in order to answer the question. Does demand mean demand today? This week? This year? All of these time units are going to result in different quantities demanded, so itÃ¢â¬â¢s important to specify which one you are talking about. Unfortunately, economists are often somewhat lax about mentioning the time units explicitly, but you should remember that they are always there.