Definition: Demand in economics is how many goods and services are bought at various prices during a certain period of time. Demand is the consumer's need or desire to own the product or experience the service. It's constrained by the willingness and ability of the consumer to pay for the good or service at the price offered.
Demand is the underlying force that drives everything in the economy. Fortunately for economics, people are never satisfied.
They always want more. This drives economic growth and expansion. Without demand, no business would ever bother producing anything.
Example of Demand:Suppose someone want to get a car and he has the ability to purchase it and also he has the willingness to expand it then it will call demand. If any of the conditions does not satisfy then it will not consider as demand.
Business Depend On Demand: All businesses try to understand or guide consumer demand, so they can be the first or the cheapest in delivering the right products and services. If something is in high demand, businesses make more revenue. If they can't make more fast enough, the price goes up. If the price increase is sustained over time, then you have inflation.
Conversely, if demand drops then businesses will first lower the price, hoping to shift demand from their competitors and take more market share.
If demand isn't restored, they will innovate and create a better product. If demand still doesn't rebound, then companies will produce less and lay off workers. This contraction phase of the business cycle can end in a recession.
Demand Law:In a specific period of time, when other things hold remaining constant, If the price of any good/service is increased, the demand of that good/service will be decreased. On the other hand, if the price of any good/service is decreased, the demand of that good/service will be increased. This type of negative relationship between price and demand is said to be as demand law.
Demand Law Symbolically:
Here P=Price and D=Demand