Demand Quantity

Demand Quantity

Demand, the quantity of a commodity consumers wish, and are able, to buy at a given price in a given period. Demand in economics thus goes beyond the everyday notion of 'desire' or 'need': unless the desire is made effective by ability and willingness to pay it is not demand in the economic sense.

The amount of a commodity that a consumer will be prepared to buy in a given period depends upon the price charged, the quality of the commodity, the service supplied with it, the prices of related (substitute or complementary) commodities, his preferences between alternative commodities, his income and his expectations (of future income and prices). To relate quantity demanded to so many 'variables' at once is not practicable: the economist therefore attempts to isolate what he considers (either intuitively or from observation of events in the market) to be the most important variable and to relate the quantity demanded to changes in it, assuming all other things constant. In this way demand is generally expressed in relation to price. Observation of behaviour of buyers in the market then yields the following basic generalization or 'law' of demand: 'The higher the price the smaller the quantity demanded; the lower the price the larger the quantity demanded.' But demand can also be expressed as a 'function' of quality, service, income, expectations or the other variables.

It is instructive, and helpful in more refined analysis, to express this law in a chart or graph. If price is measured vertically and quantity horizontally, so that the 'boundaries' of the graph appear like a capital L, then if price is assumed to change continuously by small amounts, the law of demand given above would yield a smooth 'demand curve' inside the L, failing from left to right. Starting at any relationship between price and quantity as indicated by a point on the curve, a fail in price would produce an 'extension' of demand to a new point lower down the curve to the right; a rise in price would produce a 'contraction' of demand to a new point higher up the curve to the left. The extent of the 'extension' or 'contraction' indicates the (price) elasticity of demand, that is, the responsiveness of demand to changes in price.

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