The quantity demanded is the specific amount of goods or services that people can buy in a specific place and at a specific time for a price agreed upon in advance by the seller.
Demand is formed under the influence telegram dating philippines of two groups of factors: endogenous and exogenous.
The first group includes factors that are formed within the system of supply and demand, and the second – under the influence of external stimuli, for example, when the state intervenes in the business processes of a particular enterprise.
The demand function is the relationship that arises between the demand value and the factors that influence it. It is represented by the following formula:
Qd = Qd (P1… Pn, I, E, R, N, T, X),
Where:
Qd – the amount of demand for a particular product.
P1… Pn – cost of the analyzed products.
I – consumer income.
E – customer expectations regarding the cost of the product.
R – income of potential clients.
Price and price factors are also interconnected with demand factors. Namely, if the cost of a product increases, the desire to buy it decreases. And vice versa, if the price of a product has fallen, the need may increase. Such a relationship between demand and price will work smoothly and accurately in the absence of other factors that influence the functioning of market laws. These elements include conditions of shortage of a certain category of goods or services, provoking excitement among consumers.
What is demand?
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Relationship between demand and price factors
The law of demand and price factors are closely interrelated. However, they are not the only ones that influence the market. There is the principle of income and substitution, which includes the following provisions:
If prices rise, the consumer's real income decreases, while monetary profit does not change. This provokes a decrease in purchasing power and is the first reason for the decrease in the desire to purchase this product or service. This is the influence of the income effect on the amount of demand in market relations.
Rising prices force consumers to look for cheaper analogues of familiar goods. Thus, demand for a specific product inevitably decreases, since price factors of competition have not been cancelled. This is how the principle of substitution manifests itself.
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The influence of price factors on the formation of demand allows us to draw the following conclusions:
The principle of diminishing marginal demand has a significant impact on the behavioral algorithms of potential buyers. Its essence lies in the fact that customers are ready to increase demand if the price of the product decreases. This principle works stably in wholesale trade.
According to the current law of demand, an expensive product does not cause a desire to buy, but a product on sale or on sale increases it many times over.
The income effect is that when prices rise and there is no cash flow, goods become less affordable for buyers, and demand decreases accordingly.
Substitution effect. When purchasing power decreases due to higher prices, consumers search for alternative options for goods and services that satisfy the same need but are much cheaper.
Price factors of the market work to change the prices of related goods. For example, when the price of coffee increases, the demand for tea and other drinks increases, and when gasoline becomes more expensive, you can see that the demand for cars falls.
During an economic crisis, the law of demand may not work as stably as on normal days. Exceptions include:
Giffen's paradox . In the graph, the price factors of demand during a crisis look like this: prices for essential goods increase, but demand for them does not change, since the need for buyers also remains relevant.
Veblen effect . In a crisis situation, luxury goods sharply increase in price, but demand for them still does not fall.
Snob effect. In conditions of economic instability, people have an increased need to stock up and invest their savings in purchases that were postponed until better times. The demand for goods increases significantly.