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Glossary
Definition of Demand

Economists define demand as the quantity of a good or service that buyers are willing and able to buy at all possible prices during a certain time period. So, there are two components of demand: a buyer's willingness to buy and ability to pay.

Components of Demand

As with each of us, Olivia has certain likes and dislikes.  An example of a like?  Corvettes.  An example of a dislike?  Sauerkraut. 

Components of Demand

Olivia is willing to buy a new Corvette. 

Sadly, she doesn't have the ability to pay for it.

Olivia is not included in the demand for a Corvette.

Components of Demand

On the other hand, Olivia has the income to buy multiple jars of sauerkraut—she has the ability to pay.

But she doesn't have the willingness to buy sauerkraut.

Olivia is not included in the demand for sauerkraut. She is simply not in the market for sauerkraut.

Components of Demand