Demand - Term Overview

HOME | BLOG | DEMAND - TERM OVERVIEW

Demand is understood from an economic point of view, the quantity of goods and services that companies and households want to acquire within a market economy. When we speak of aggregate demand, said demand includes all possible goods and services. Demand, in turn, is associated with the demand curve, which is the line represented on Cartesian axes, where quantity is expressed on the abscissa axis and price on the ordinate axis.

This line unites all the possible quantities that the economic units of the market in question are willing to acquire at the different prices. The demand curve has a negative slope, since the relationship between the quantity demanded and the price is inversely proportional. That is, the higher the price, the lower the quantity demanded. We must remember in this sense that what in microeconomics is about studying and analyzing the most efficient way to allocate resources, taking into account that resources are limited, and, at least in theory, needs are not.

In reality, there are many other factors that can influence the demand for products or services. However, what the demand model does is a presumption, by virtue of which it's assumed that all other factors, different from quantity and price, remain constant. Among those other factors, we can mention the climate, geographical proximity, possible natural events of a more or less extraordinary nature, the economic situation of the claimants, their ability to pay, the existence or not of alternative goods or resources, and the price. of these.

But also, not all suing curves are the same. Thus, the demand curve is considered to be elastic, when at a given variation in the price of a good or service, the quantity demanded varies in a greater proportion. In other words, when demand is elastic, price variations will influence the variation in quantity demanded. On the contrary, if the demand is inelastic, the variation in prices doesn't determine a significant variation in the quantity demanded. That is, demand is inelastic when the quantity demanded varies little regardless of price.

Read more articles in our blog.

Share on Facebook Share on Twitter Share on LinkedIn
Back to top

Home | Privacy Policy | Terms of Use

Copyright 2011 - 2020 - All Rights Reserved