What is the theory of demand?

The theory of demand is an economic theory that is part of economists understanding the curve of supply and demand. The supply and demand curve is often used as a basic argument for capitalism. According to the theory of demand and concept of supply and demand, the company sets the perfect price for any item over time.

For any product that exists on Earth, there is a certain level of demand. Demand simply refers to the consumer's desire to buy an item. The demand is often represented in terms of currency. For example, if an item costs a very low amount, many people may want a product, even if they don't really need it or have it. On the other hand, if the item is extremely expensive, then only those who want the item will be willing to pay for it.

As a result, the product demand is directly influenced by how much it costs. In the theory of demand, the optimal level of demand should be achieved. This level of demand occurs when the product is determined by buying itof those who need this item. This maximizes efficiency.

supply can also affect demand. The theory of demand is therefore linked to the theory of offer. The more the product is - or the larger the delivery - the greater the competition for customers between manufacturers and sellers of the product.

When the offer is too high, it exceeds the demand for the item. As a result, manufacturers of the product will have to reduce the price of the item to increase demand. When the price is reduced, more people will want an item. For example, assume that ice cream cups cost $ 100 (USD); The demand would be very low. If the manufacturer reduced the price to $ 1, the demand would be very high. In fact, people who really didn't really want ice cream would probably buy simply, because the costs of them were so low.

Over time, the curves of supply and demand will eventually meet in optimal BOde. In the case of demand theory, this means that the industry will determine the exact price at which too much billing would reduce demand and cost them money, while accounting less would result in loss of income, even with additional demand. This is essential for the idea of ​​a capitalist society that believes that the market sets a suitable price without intervention.