Q:

What is the economic meaning of demand?

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Quick Answer

In economics, demand is a measure of how much buyers want or need a product. For example, consumers may collectively avoid buying a particular product because they don't understand it or don't believe it has value, resulting in low demand.

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What is the economic meaning of demand?
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Full Answer

The law of supply and demand influences free market economies because sellers can raise prices on high-demand products. However, factors such as competition and supplies balance out demand by stabilizing prices. When more companies produce the same product or make them widely available, more consumers have access to the product. Competition counteracts high demand and forces sellers to lower prices to retain their customer base. Lack of marketing may also weaken demand simply because the product doesn't have enough visibility.

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Related Questions

  • Q:

    What is price elasticity?

    A:

    Price elasticity, or price demand, is the measure of how much the demand of a product can respond to a change in its price. Price elasticity is an important concept in the law of supply and demand.

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  • Q:

    What is the law of demand?

    A:

    The law of demand is a foundational concept of economics which indicates that demand for a particular good rises as the price for the product falls. Inversely, when the price for a good rises, demand falls.

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    What happens when supply exceeds demands?

    A:

    The law of supply and demand in economics indicates that a "surplus" exists when supply of a given product exceeds demand. If the supply of gum exceeds demand, for instance, resellers end up with excess inventory that they discount or throw out. A surplus also contributes to lowering prices because companies are competing for business, rather than consumers desperately trying to find an affordable option.

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  • Q:

    Is GDP a good measure of economic well-being?

    A:

    The GDP (gross domestic product) is not considered to be a good measure of economic well-being by many because it only measures the sales and income from economic purchases rather than looking at any moral implications. An example might be an increase in gun sales, which raises the GDP and would be considered positive; however, that raise in gun sales might have been due to sales among the criminally-minded.

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