What is the meaning of 'demand'. Why is the market demand curve sloping downward? (5 marks)
(5 marks, 2012 Q1bi)
A.
i) Meaning of 'demand'.
Definition of 'Demand' An economic principle that describes a consumer's desire and willingness to pay a price for a specific good or service. Holding all other factors constant, the price of a good or service increases as its demand increases and vice versa.
Think of demand as your willingness to go out and buy a certain product. For example, market demand is the total of what everybody in the market wants.
Businesses often spend a considerable amount of money in order to determine the amount of demand that the public has for its products and services. Incorrect estimations will either result in money left on the table if it's underestimated or losses if it's overestimated.
Take for example, the demand for an IPhone. It is the willingness of parting an amount of money to buy an IPhone. In the scenario of current Malaysian market place, the demand for IPhone is great! People are willing to pay RM2,000 for an IPhone. Hence, market demand for IPad is huge, as many people would be willing to exchange RM2,000 for an IPhone.
Contrasting to the demand for a NOKIA handphone, it is in poor demand. It would be very lucky that there is one or two people in the market who would be willing to pay for a NOKIA handphone at RM200! A sum 10 times less than the IPhone.