By demand one understands the quantity of each kind in the about property or achievement, the economical participants ready of a certain price in the exchange against money or other goods and capable is to be acquired.

Regulation factors

Micro-economically the goods oh question is regarded by goods prices, by which determines prices of all other goods in the Warenkorb, by the income and of the use preferences of the buyers.

For individual goods one differentiates the individual demand one-good by an individual participant from the total demand, which by those addition of the demand of all Nachfrager of the appropriate property determine will.

In the economic science one usually assumes - ceteris paribus - a systematic connection between the prices, which income and the inquired goods quantity exist. This connection is represented in demand curves or demand curves. These assign with given income each price the goods quantity to usual inquired with it way. Changes of the income lead to shifts of the demand curves.

The interaction of supply and demand creates the market equilibrium.

Connection of price and demand

In a simple demand model from simple homogeneous economical property one proceeds. The homogeneity of a property is the condition for the fact that of different quantities of a property it is spoken and so the demand of different participants can be summarized quantitatively.

It is accepted at most goods that with rising price the demand decreases/goes back, which demand curves run thus falling (law of the demand). How strongly the price increase will pierce on the demand is measured, with the help of the price elasticity of the demand, therefore usual way is negative (special case e.g. to Giffen paradox, see also demand behavior further below). While a falling process of the demand curves for the demand for factors of production from the neoclassical theory of the enterprise can be deduced, the falling demand for consumer goods does not follow from the neoclassical theory of the households, since the existence cannot be excluded from Giffen goods.

On the usual assumption of the micro-economic theory it can be proven however that households decrease their demand for a product rising in the price, if their material income is kept constant, i.e. if the rising prices become balanced by a higher income.

Connection between incomes and demand

The connection between demand and income is described by the income elasticity of the demand. This is usually positive, i.e. with increases in revenue also the demand increases.

Special cases: At vitally necessary goods it is however smaller than 1 (Engel' law): If the income rises by 10 per cent, for example the demand for food rises by 7 per cent. With luxury goods the income elasticity is larger than 1 according to. Negative income elasticity observed for inferiore goods, at which during given prices and rising income the demand sinks, as well as for prestige goods, which are bought, because the high price serves as social signal (Snob effect).

Whether the demand processes for certain consumer goods, subordinated by the theory, can be observed also empirically, is disputed, since one can never observe the demand at the market as such, but only market results, which result from meeting supply and demand (so-called identification problem).

In the neoclassical price theory it is accepted that under competitive conditions (partialanalytisch) that-current price of a property is determined by the interface Gesamtangebots-und total demand curve for this property. In that-general equilibrium analysis the prices of all goods through those are determined simultaneous equating of the total offer and totaldemand on all markets.

How far the overall economic demand can be increased by wage increases on a long-term basis, as this by trade unions occasionally with reference to the purchasing power theory of the wages is stated, is questionable. In addition, higher wages lead to more incomes, it on the one hand at short notice can to it lead that enterprises replace workers by capital and increase the productivity. Thus then the number of the income subscribers decreases/goes back. In the Federal Republic it cannot be proven however empirically that higher employee incomes lead to unemployment. Rather at least the opposite can be proven for the first decades.

Demand behavior

The demand behavior is the behavior of consumers as a function of price (expenditures) or income (incomes).

depending upon property one differentiates according to income effect and price effect

The demand is affected however still of many social factors, like validity consumption or

Problems of the separation from price effect and income effect

With the economic analysis it is to be noted that with rising aggregation degree (i.e. the more individual participants and individual goods to be summarized), which becomes ever more problematic ceteris paribus clause, since evenly any longer cannot be assumed remaining circumstances (income, demand structure) of in an aggregated demand curve or - circle representable changes to remain unaffected by prices and demand quantities. This difficulty go around models of a general equilibrium.

See also: Slutsky dismantling

See also

• Price effect (alternative of explanation beginnings to the demand behavior of households)
• Overall economic demand
• Offer

This text is partly based on the micro economics glossary of professor Wilhelm Lorenz and is licensed under GNU-FDL.

Articles in category "Demand (Mikroomie)"

We found here 19 articles.