2.4 : Market Demand

Market demand is the total amount of a product that buyers in a specific market are willing and able to purchase at a given price. The following factors influence it:

Price: When prices drop, demand usually goes up, and when prices rise, demand tends to decrease. This idea is shown in demand curves.

Consumer Preferences: What people like and dislike can greatly affect demand for a product.

Income: Increasing levels of purchasing power contribute to increasing demand, especially for high-quality goods.

Other Market Conditions: Things like competition, availability of substitutes, and what consumers expect can also impact demand.

Consider a potato market that serves three customers: a café owner, a local resident, and a catering firm. Each has its own desire for potatoes at varied prices, which adds up to the market demand.

Demand in the market varies as the circumstances in the market shift. For instance, the demand curve in the potato market may shift to the right, signifying rising demand, when more consumers start to purchase potatoes.

Understanding market demand helps businesses plan how much to produce, what prices to set, and predict sales. Knowing about market demand allows policymakers to make rules that keep the economy steady and growing.