Demand

Demand is the desire to own anything and the ability to pay for it and willigness to pay. The term demand signifies the ability or the willingness to buy a particular commodity at a given point of time. Demand is also defined elsewhere as a measure of preferences that is weighted by income.

Innumerable factors and circumstances could affect a buyer's willingness or ability to buy a good.

Good's own price: The basic demand relationship is between the price of a good and the quantity supplied. Generally the relationship is negative or inverse meaning that an increase in price will induce and decrease in the quantity demanded. This negative relationship is embodied in the downward slope of the consumer demand curve. The assumption of a an inverse relationship is reasonable and intuitive. If the price of a new novel is high, a person might decide to borrow the book from the public library rather than buy it. Or if the price of new equipment is high a firm may decide to repair existing equipment rather than replacing it.

Price of related goods: The principal related goods are complements and substitutes. A complement is a good that is used with the primary good. Examples include hotdogs and mustard; beer and pretezels, automobiles and gasoline. Close complements behave as a single good. If the price of the complement goes up the quantity demanded of the other good goes down. Mathematically, the variable representing the complementary good would have a negative coefficient. For example, Qd = P - Pg where Q is quantity of automobiles demanded, P is the price of automobiles and Pg is the price of gasoline. The other main category of related goods are substitutes. Substitutes are goods that can be used in place of the primary good. The mathematical relationship between the substitute and the good in question is negative. If the price of the substitute goes down the demand for the good in question goes up.

Income : The more money you have the more likely you are to buy a good.

Taste or preferences: The greater the desire to own a good the more likely you are to buy the good. There is a basic distinction between desire and demand. Desire is a measure of the willingness to buy a good. Demand is the willingness and ability to affect one's desires. It is assumed that tastes and preferences are relatively constant.