The Meaning and Law of Demand

Introducing the Theory of Demand

As human beings, we satisfy our wants by purchasing and consuming goods and services. In ordinary terms, demand simply means a desire, a wish or a want. In economics, demand goes beyond the expression of mere desire, wish or want. It is the desire, wish, or want backed by the ability to pay. If what you desire, wish or want is backed by the ability to pay, it is called effective demand.

Meaning of Demand

Demand can be defined as the ability and willingness of a consumer to buy a specific quantity of goods or services at a given price within a specific period of time when all other demand factors remain unchanged. In economics, demand is quite different from wants or needs. Wants or needs refer to a mere desire for a commodity but not backed up by the willingness and ability to pay for it.

The Law of Demand

The way consumers react to a change in the price of a commodity is so typical that economists state it as a rule or law. This law states that all things being equal, the higher the price, the lower the quantity of goods that will be demanded and vice-versa. This means that the quantity demanded of a good or service is inversely related to its price. This law is often regarded as the first law of demand and supply.