Download >>> https://byltly.com/283wn7
The rediscovery of the relevance of demand in economic models has drawn an increasing amount of attention in recent years. Demand can represent consumers’ willingness to purchase goods and services. The analysis of demand for goods and services is important when designing policy or determining the appropriate value for money with regard to public spending. This paper examines the origins, components, and role demand plays in economic models (from neo-classical economics to Keynesian economics). This paper also discusses how theories differ on what constitutes "good" demand - whether it is defined by income level or aggregate consumption. A discussion on what constitutes a"shift" in demand is also included. Demand has been a part of economic theory since the 1930s. It was developed by two key economists: John Maynard Keynes and Alfred Marshall. Demand for goods and services was developed from the work of many others before them including Adam Smith, Jean-Baptiste Say, David Ricardo, and Thomas Malthus. It was Marshall who outlined a systematic way to lay out a framework for representing combined consumer demands in an aggregate market. The framework he used to describe combined consumer demand was the theory of marginal utility. This framework allowed Marshall to represent consumer behavior more closely than previous economic models had previously been able to do so. The aggregate demand model he created also incorporated supply to help determine equilibrium price. Keynes was able to develop the concept of aggregate demand further by including the concept of interest rate sensitivity into his model. He argued that people will spend less on goods or services if they are high in price, but not buy more if they are low in price. The neo-classical economist’s assertion that consumer demands depend on income level rather than each individual’s willingness to spend is because the theories suggest that the aggregate demand curve will shift parallel, rather than up or down, when income levels change significantly. This idea is the central tenet of most neo-classical models. However, this is a simplistic view of consumer behavior and most goods and services have a secondary market for re-sale. For example, most homes do not have a market value based on their physical functionality, instead they have a market value based on location and price. In many cases, the building is still the same when it is sold to a new buyer. In this instance, if raising income level increases consumer’s willingness to spend on housing then the demand curve will shift from left to right from one graph to another. Whether the demand curve shifts left or right depends on the price of housing. If the price increases, then consumer’s willingness to spend will increase or fall, but if the price decreases then consumer’s willingness to spend will decrease or increase. The policies that are implemented can have a large impact on an economy. For example, if there is a government policy that raises income levels by lowering interest rates then this will shift the aggregate demand curve downward. The policy would cause consumers are less willing to spend because they are relatively poorer than previous levels of income. To counteract this, modern economists recommend instead referring to demand curves rather than elasticity curves for deciding public spending policy. cfa1e77820
Comments