Demand - a major component of the market

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demand - this is one of the main forms of expression solvent needs.This is the price the consumer is willing to pay for the goods he needs in a certain place at a certain time.Demand creates supply.It is these two components are the basis for the functioning of any market, creating competition and setting prices.However, it is understood that the mere desire to have the goods, supported by cash, not a demand.

This economic category can be considered, guided by numerous factors.Thus, the individual demand - it is a personal human need reinforced financial resources.Solvency desire to purchase the service or product in a certain period of time the whole society is the aggregate demand.

This economic category is directly proportional to the price.Under ideal economic conditions, consumer demand - a category which will be the higher, the lower the price we require good.Conversely, at high fixed prices for the commodity demand will fall.This relationship is the law of demand.

motive for changes in the level of demand can serve as one of three reasons:

1. price reduction leads to an increase in demand for goods;

2. if the product is low cost, it increases the purchasing power of the consumer;

3. If the market is filled with this product, the utility of the goods is reduced, and the person is ready to buy it only at a low cost.

At the same amount of goods that people want to buy at a given time at a given price is the volume of demand.

on aggregate demand influence factors on the nature of its appearance can be of price and non-price.Price factors - those that directly affect the price.Non-price factors have an impact only on demand.It is precisely the beginning, which repelled in the analysis of the purchasing power of man.

Factors affecting aggregate demand


What is included in their composition

price factors

effect of interest rate - with increasing priceany goods increased amount of loans and, accordingly, the level of interest rates.The result is a decrease in demand.

wealth effect - the rise in prices causes decline in real purchasing power of financial assets (stocks, bonds, vouchers, etc.) As a result, a decrease in people's income and reducing their purchasing power.

effect of import purchases - an increase in the prices of goods of domestic producers reduces the demand for them.Consumers are eager to satisfy their needs by purchasing imported, cheaper counterparts.

price factors

change in consumer income - increase the level of income a person allows him to spend on goods and services to a greater amount of money, iedemand is growing.The inverse image of the demand reduction affects income.

The change in the cost of investing - the growth rate of investment (investment demand) depends on reducing the interest rate by lowering taxes and deductions, the effective use of production capacity, the introduction of know-how, etc.

change in total government expenditure - with growth / decrease in expenditures of the state mechanism for the acquisition of goods is the process of increase / decrease in demand.

change in costs attributable to net exports - it is influenced by the rate of inflation in the country, terms of trade and changes in the income of foreign consumers.