what is demand 
demand is an economic concept that relates to a consumer s desire to purchase goods and services and willingness to pay a specific price for them an increase in the price of a good or service tends to decrease the quantity demanded likewise a decrease in the price of a good or service will increase the quantity demanded demand is a concept that consumers and businesses are very familiar with because it makes sense and occurs naturally in the course of practically any day for example shoppers with an eye on products that they want will buy more when the products prices are low when something happens to raise the prices such as a change of season shoppers buy fewer or perhaps none at all generally speaking there is market demand and aggregate demand market demand is the total quantity demanded by all consumers in a market for a given good aggregate demand is the total demand for all goods and services in an economy multiple stocking strategies are often required to handle demand investopedia paige mclaughlinunderstanding demandbusinesses can spend a considerable amount of money to determine the amount of demand the public has for their products and services how many of their goods will they actually be able to sell at any given price incorrect estimations can result in lost sales from willing buyers if demand is underestimated or losses from leftover inventory if demand is overestimated demand helps fuel profits and the economy that s why it s an important concept demand is closely related to the concept of supply while consumers try to pay the lowest prices they can for goods and services suppliers try to maximize profits if suppliers charge too much for a product the quantity demanded drops and suppliers may not sell enough product to earn sufficient profits if suppliers charge too little the quantity demanded increases but lower prices may not cover suppliers costs or allow for profits some factors affecting demand include the appeal of a good or service the availability of competing goods the availability of financing and the perceived availability of a good or service demand elasticity relates to how sensitive the demand for a product is as the price for it changes for example if there s a big change in demand due to a small change in price demand elasticity is said to be high shoppers may choose attractive substitute products if the price for their usual product has increased somewhat that could indicate high demand elasticity and is useful for businesses to know determinants of demandthere are five main factors that drive demand as these factors change so can the demand for a product or service in fact they change all the time so demand can be constantly in flux the law of demandthe law of demand states that when prices rise demand will fall when prices fall demand will rise the law of demand is simply an expression of the inverse relationship between price and demand it involves price only none of the other drivers of demand mentioned above are involved if they do come into play the functioning of the law can be affected demand can be seen to change for reasons other than price demand curvea demand curve is a graph that displays the change in demand resulting from a change in price it s a visual representation of the law of demand the demand curve can be a useful tool for businesses because it can show them the prices at which consumers start buying less or more it can point out prices at which a company can maintain consumer demand and support reasonable profits on the demand curve graph the vertical axis denotes the price while the horizontal axis denotes the quantity demanded a demand schedule or table created by a business that lists the quantity of a product that consumers will buy at particular price points can provide the figures for the demand curve chart once plotted the demand curve slopes downward from left to right as prices increase consumers demand less of a good or service a supply curve slopes upward as prices increase suppliers provide more of a good or service market equilibriumthe point where supply and demand curves intersect represents the market clearing or market equilibrium price an increase in demand shifts the demand curve to the right the two curves then intersect at a higher price which means consumers are willing to pay more for the product equilibrium prices typically change for most goods and services because factors affecting supply and demand are always changing free competitive markets tend to push prices toward market equilibrium market demand vs aggregate demandthe market for each good in an economy faces a different set of circumstances which vary in type and degree in macroeconomics we also look at aggregate demand in an economy aggregate demand refers to the total demand by all consumers for all goods and services in an economy across all the markets for individual goods since aggregate demand includes all goods in an economy it is not sensitive to competition or the substitution of goods nor is it to changes in consumer preferences between various goods demand in individual goods markets can be affected by these factors macroeconomic policy and demandfiscal and monetary authorities such as the federal reserve devote much of their macroeconomic policy making to managing aggregate demand if the fed wants to reduce demand it can raise interest rates and increase prices by curtailing the growth of the money supply and credit if it needs to increase demand the fed can lower interest rates and increase the money supply giving consumers and businesses more money to spend 1in certain cases even the fed can t fuel demand when unemployment is on the rise people may not be able to afford to spend or take on cheaper debt even with low interest rates 