Business Definition for: demand
demand
economic expression of desire, and ability to pay, for goods and services. Demand is neither need nor desire; the essence of demand is the willingness to exchange value (goods, labor, money) for varying amounts of goods or services, depending upon the price asked.
demand
desire for a product or service that results in a purchase. Demand levels vary along a continuum from negative demand that leads to avoidance to excess demand that outpaces supply. Different marketing techniques are appropriate at different points along the continuum. For example, consumers are persuaded to donate blood by conversional marketing that changes their perception of it from a frightening to a positive experience. Some products for which there is no demand, such as tie-dye clothing in the 1980s, came into demand again in the 1990s through stimulational marketing. Developmental marketing creates a product to fill a previously unsatisfied demand or need. Other types of marketing increases demand for declining brands or may serve to maintain demand for a successful brand. At the far end of the demand continuum,
demarketing
and
countermarketing
are used to suppress demand.
See also
cross elasticity of demand
,
demand-oriented pricing
demand
quantity of goods or services purchased at a given price.
Example: Although 1,000 new housing units were produced last year, there was demand for only 400 units, causing
overbuilding
in the local housing market.
See also
supply and demand
Related Terms:
degree to which demand for one product is affected by the price of another product. Demand for frozen orange juice concentrate may increase when the price of fresh orange juice (a substitute product) increases. Demand for hotel rooms in a ski resort may decrease when the price of a lift ticket (a complementary product) increases. An increase that causes an increase is the result of positive elasticity. An increase that causes a decrease is the result of negative elasticity. Products with no impact on each other have zero cross elasticity. Marketers need to understand the cross elasticity factors that affect their products and competitors' products.
method of establishing the price for a product
or service based on the level of demand; also called demandbased pricing. For example, sellers of compact discs charge a higher price for recordings that appeal to a broad market, such as those of Garth Brooks or Madonna, than they charge for recordings of classical music. The manufacturing cost of the product and the required gross profit margin are of secondary importance to demand in setting the price.
a fundamental economic concept, which holds that the price is set at an amount where the quantity supplied and quantity demanded clear the market. From that intersection, higher prices will increase supply, reduce demand, or both. Lower quantities demanded will reduce prices.
Example: The prices of rents and real estate products are set in the market by supply and demand. However, the amount of real estate adjusts slowly to market forces because of the long planning and development period and the lengthy physical life of improvements.
Referring Terms:
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