DEMAND

Meaning of demand

The term demand refers to the quantity of good or service that buyers are willing and able to buy or
purchase at various prices during a given period of time. It is to be noted that demand, in economics is
something more than the desire to purchase though desire is an element of it. For example people may
desire more much bigger things like bigger houses, luxurious cars etc. but there are also constraints that
they face such as prices of products and limited means to pay. The effective demand for a thing depends
on (i) desire (ii) means to purchase (iii) willingness to use those means for that purchase,

Two things to be noted about the quantity demanded.

1. The quantity demanded is always expressed at a given price. At different prices, different
quantities of a commodity are generally demanded.
2. The quantity demanded is a flow. We are concerned not with a single isolated purchase but with
a continuous flow of purchases and we must therefore express demand as so much per period
of time.

Therefore demand simply means various quantities of a given commodity or service which consumers
would buy in one market during a given period of time, at various incomes or at various prices of related
goods.

WHAT DETERMINES DEMAND.

The important factors that determine demand are given below.

(I) Price of the commodity: obviously, the goods own price is a key determinant of its demand. Other
things being equal, the demand for a commodity is inversely related to its price. This implies that a
rise in the price of a commodity brings a bout a fall in the quantity purchased and vice-versa. This
happens because of the level of income and substitution effects.
(II) Price of related commodities. Related commodities are if two types; complementary goods and
competing goods or substitute goods.
Complementary goods and services are those that are bought or consumed together of
simultaneously. Examples are tea and sugar, pen and ink. Here the increase in demand for one
causes an increase in the demand for the other. For example a fall in the price of one commodity
will lead to increase in the demand for the other e.g. in computers, a fall in the price of computers
will cause a rise in the demand for computer software.
Two commodities are called competing or substitutes when they satisfy the same want and can be
used with ease in place of the other. For example tea and coffee, ink pen and ball pen, the different
brands of tooth paste. When goods are substitutes, a slight increase in the price of the other makes
buyer to switch to a cheaper substitute. This decreases the demand for the product at given price
but increases the demand for the substitute good.
(III) Disposable income of the consumer: the purchasing power of a buyer is determined by the level of
a buyer is determined by the level of his disposable income. Other things being equal, the demand
for a commodity depends upon the disposable income of the potential purchasers. In general,
increase in disposable income tends to increase the demand for particular types of goods and
services at a given price. A decrease in disposable income generally lowers the quantity demanded
at all possible prices.
(IV) Taste and preferences of buyers. The demand for a commodity also depends upon the tastes and
preferences of buyers and changes over a period of time. Goods which are modern or new in
fashion command higher demand than goods which are old or out of fashion. For example a there is
greater demand for the latest digital devices and the trending clothing and we find that more people
are discarding these goods currently in use even though they could have used it in some years back.
This is also explained as the bandwagon effect where the demand for a commodity is increased due
to the fact that others are also consuming the same commodity. It represents the desire to purchase
goods in order to be fashionable or stylish or to conform to the people the wish to be associated
with.
(V) Consumers’ expectations. Consumers’ expectations regarding future prices, income, supply
conditions etc. influence current demand. If consumers expect increase in future prices, increase in
income and shortages in supply, more quantities will be demanded. If they expect a fall in price of
fall in income, they will postpone their purchases of nonessential commodities and therefore, the
current demand for them will fall. Levels of consumer and business confidence about their future
economic situations also affect spending and demand.
(VI) Size of the population, generally, the larger the size of population of a country or region, larger
would be the number of buyers and the quantity demanded in the market would be higher at every
price and the opposite is the case when population is less.
(VII) The level of national income and its distribution. The level of level of income is a crucial
determinant of market demand. Higher the national income, higher will be the demand for all
normal goods and services. The wealth of a country may be unevenly distributed so that there are a
few very rich people while the majority is very poor. Under such conditions, the propensity to
consume of the rich people is less than that of the people. Consequently, the demand for consumer
goods will be comparatively less. If the distribution of the income is more equal, then the propensity
to consume of the country a whole will be relatively high indicating higher demand for goods.
(VIII) Consumer-credit facility and interest rates; Availability of credit facilities induces people to
purchase more than what their current incomes permit them. Credit facilities mostly determine the
demand for investment and for durable goods which are expensive and require bulk payments at
the time of purchase. Low rates of interests encourage people to borrow and therefore demand will
be more.
(IX) Government policies and regulations; the governments influence demand through its taxation,
purchases, expenditures and subsidy policies. While taxes increase prices and decrease the quantity
demanded, subsidies decrease the prices and increase the quantity demanded . for example taxes
on luxurious goods and subsides for solar panels. Similarly total bans, restrictions and higher taxes
may be used by government to restrict the demand for socially undesirable goods and services.
Government’s policy on international trade also will affect the domestic demand for goods and
services.

Apart from the above, factors such as weather conditions, business conditions, stage of business cycle,
wealth, levels of education, marital status, socio-economic class, group memberships, habits of the
consumer also play important roles in influencing demand.
THE DEMAND FUNCTION.

The demand function states in equation form. The relation ship between demand for a product and its
determinants. Any other factors that are not explicitly listed in the demand function are assumed to be
irrelevant or held constant. A simple demand function may be expressed as follows;

Qx = f(Px, Y, Pr,)

Where Qx is the quantity demanded of a product

Px is the price of the commodity

Y is the money income of the consumer and,

Pr is the price related goods.

THE DEMAND LAW

The law states the nature of relationship between quantity demanded of the product and its price. Prof.
Alfred Marshall defined the law thus; “The greater the amount to be sold, the smaller must be the price
at which it is offered in order it may find purchasers.”

Or

“ The amount demanded increases with a fall in price and diminishes with a rise in price”

The law states that other things being equal, when the price of goods rises, the quantity demanded of
the good will fall. Thus there is an inverse relationship between price and quantity demanded. The
quantity demanded is the amount of a good or service that consumers are willing to buy at a given price,
holding constant all the other factors that influence purchases . the quantity demanded of a good and
service can exceed the quantity actually sold.

The Law of Demand may be illustrated with the help of a demand schedule and a demand curve.

The demand schedule.

A demand schedule is a table showing the quantities of a good that buyers would choose to purchase at
different prices, per unit of time with all other variables held constant. In this example we are going yo
take the hypothetical data for prices and quantities of coffee. A demand schedule is drawn upon the
assumption that all other influences remain unchanged.

Demand schedule of an individual buyer

Price of coffee per cup Quantity demanded

(cups per week)a

A 3000 0
B 2000 2
C 1500 4
D 1000 6
E 500 8
F 200 10
G 0 20
The table shows how many cups of coffee the buyer takes at different prices of coffee, holding constant
everything else that influences how much of coffee this this particular buyer wants to buy. We can see
that if the coffee is free ( price = 0), the buyer takes 20 cups per week , as the price increase, she buys
fewer and fewer cups. And when the price reaches shs.3000, she does not buy coffee at all. There fore
the demand schedule obeys the Law of Demand.

The demand curve.

A demand curve is a graphical presentation of the demand schedule. By convention the vertical axis of
the graph measures the quantity of the good, which is usually expressed in some physical measure per
time period. It shows the relationship between the quantities of a good that buyers are willing to buy
and price of the good. We can now the data from the table.

illustration

TYPES OF DEMAND CURVE

(a) Individual Demand Curve

(b) Market Demand Curve

(a) Individual Demand Curve

• It is a curve showing different quantity of a commodity that one particular buyer is ready to

buy at different prices of the commodity at a point of time.

• The Demand Curve slopes downward from left to right indicating inverse relationship

between price of commodity and its quantity demanded.

Illustration.
(b) Market Demand Curve

• It shows various quantities of various commodities that all the buyers in the market are

ready to buy at different possible prices of the commodity.

• It is horizontal summation of the Individual Demand Curve

Illustration.

The demand curve for goods does not have to be linear or a straight line. It can be curvilinear meaning
its slope, may vary al98ong the curve. If the change in quantity demanded does not a constant
proportion, then the demand curve will be non linear. However linear demand curves provide a
convenient tool for analysis.

(b) Market Demand Curve

• It shows various quantities of various commodities that all the buyers in the market are

ready to buy at different possible prices of the commodity.

It is horizontal summation of the Individual Demand Curve

The market demand for a commodity gives the alternative amounts of the commodity demanded per
time period at various alternative prices, by all the buyers in the market. In other words it’s the total
quantity that buyers are willing to per unit price at a given price, other things remaining constant. Thus
the market demand depends on all factors that determine the individuals demand and in addition on
the buyers number of the buyers of the commodity in the market.
A demand schedule is a table showing the quantities of a good that buyers would choose to purchase at
different prices, per unit of time ,

Quality demanded
by
Price of goods x in (shs) A B Total market demand
0 3 2 5

100 2 1 3
200 1 0 1
300 0 0 0

EXCEPTIONS TO THE LAW OF DEMAND :

When with the increase in price, more quantity of a commodity is purchased and with a decrease

in price less of it is purchased this is something which is contradictory to the law of demand. This

is known as exception to the law of demand. In this the demand curve slopes upwards from left to

right.

Following are the exceptions:

1. Articles of Distinction/Prestige Goods/ : Certain goods are purchased to emphasize status/prestige.

Such goods will be purchased when sold at higher price and are demanded less at a lower price. E.g.
Precious Diamonds ,Vintage cars ,etc. such goods are used by highly prestigious people as status symbol
for enhancing their social prestige or for displaying their wealth. i.e. they think that if the item is more
expensive then it has got more utility. As such they buy less of this commodity at a low price and more
of it at high price.

2. Giffen Goods : They are highly inferior goods showing a very high negative income effect. As a result
when price of such commodities falls, the demand also falls even when they happen to be relatively
cheaper than other goods. Giffen goods exhibit direct price demand relationship . generally those goods
which are inferior with no close substitutes available and which occupy a substantial place in consumers
budget are called giffen goods.

3. Expectation of Further Change in Price : When buyers expect a further rise in the price they purchase
increased quantity of the commodity even at a higher price and vice versa. E.g. Gold Prices. For example,
when there is a wide spread of drought, people expect that prices of food grains would raise in future.
They demand greater quantities of food grains even as their price raises. There is a change in one of the
factors which was held constant while deriving the Law of demand, namely change in the price
expectations of the people.

4. Necessities :Those goods which are a must for living and necessities of life for which a minimum
quantity has to be purchased by the consumer irrespective of the price. E.g. Food Grains, salt, etc. the
law of demand does not apply much in the case of necessaries of life irrespective of price changes,
people have to consume the minimum quantities of necessary commodities.

5. speculative good: in the speculative market, particularly in the market for stocks and shares, more will
be demanded when the prices are rising and less will be demanded when prices decline.

MOVEMENT ALONG THE DEMAND CURVE AND SHIFT IN DEMAND CURVE –

1. MOVEMENT ALONG DEMAND CURVE – It refers to the situation when the demand extends

or contracts due to fall/rise in the own prices of commodity. It therefore indicates that there is a change
in demand at each possible price because of one or more other factors, such as incomes, tastes or the
price of some other goods have changed.

2. SHIFT IN DEMAND CURVE – It refers to all such situations when demand for a commodity

increases or decreases due to changes in other determinants of demand other than own price of

commodity.

1. Movement along Demand Curve- It is of two types :

(a) Extension of Demand Curve.

(b) Contraction of Demand Curve.

(A) EXTENSION OF DEMAND

• Other things being equal when more quantity is purchased because of fall in its prices, it is

called extension of demand.

• It is also known as Increase in quantity demanded.

• It is shown by downward/rightward movement along the same demand curve.

• Example:

Px Dx

10 20

8 25

(B) CONTRACTION OF DEMAND

• Other things being equal when less quantity is purchased because of rise in its prices, it is

called contraction of demand.

• It is also known as decrease in quantity demanded.

• It is shown by the upward or leftward movement along the same demand curve.

• Example:

Px Dx

10 20

12 15

SHIFT IN DEMAND CURVE –

• It occurs due to change in other factors other than price of the commodity.

• Eg. Change in income, change in price of related goods, etc.

(1) Increase in Demand

(A) When due to change in factors other than the price of commodity concerned,more quantity

at same price or same quantity at higher price is demanded,this is termed as increase in

demand.

(B) It is also known as forward shift.

(C) It is indicated by rightward shift or upward shift to new demand curve.

(D) The important causes of increase in demand are :

• When income of consumer increases.

• When price of substitute good increase.

• When price of complementary goods fall.

• When taste of consumer shifts in favour of the commodity.

• When availability of commodity is expected to reduce in near future.

• Example1:

Px Dx

10 20

10 25

• Example2:

Px Dx

10 20

12 20
(2) Decrease in Demand

(A) When because of factors other than the price of the commodity concerned less quantity at

the same price or same quantity at a lower price is demanded this is termed as decrease in

demand.

(B) It is also known as backward shift,

(C) The Demand Curve shifts to a new Demand Curve on its left or downward.

(D) The causes for decrease in demand are :

• Fall in Consumer’s income.

• Fall in price of substitute.

• Rise in price of compliment.

• Change in taste away from the commodity.

ELASTICITY OF DEMAND.

Elasticity of demand is defined as the responsiveness of the quantity demanded of a good to the
changes in one of the variables on which demand depends. In other words, elascity of demand is the
percentage change in quantity demanded over the percentage change in one of the variables on which
demand depends.

PRICE ELASTICITY OF DEMAND :

• It is defined as a measurement of percentage change in quantity demanded in response to a

given percentage change in own price of the commodity.• It is denoted by ‘Ed’. Price elasticity
expresses the responsiveness of quality demanded of a good to change in its price given the consumers
income, his taste and prices of other goods. In other words, it is measured as the percentage change in
quantity demanded over the % change in price, other things remaining equal.

Formula

Ep = % change in quantity demanded.

% change in price

Example.

When the price of maize was 100shs./ kg, quantity demanded was 1000kg, and when the price
increased to 200shs/kg, quantity demanded was 400kgs. Determine the change in elasticity.

Solution
ED = %change in demand

% change in price

%change in demand = (1000 – 400/1000)* 100%

=60%

Percentage change in price =(200-100/100)*100

= 100

ED =60/100

=0.6.

DEGREES OF PRICE ELASTICITY OF DEMAND.

Interpretation of price elasticity of demand.

 Perfectly or completely inelastic- this is a type of elasticity of demand where a change in price
does not cause a change in quantity demanded. Price Edis zero

 In elastic demand. This is a type of elasticity of demand where a large proportionate change in
price leads to a smaller proportionate change in quantity demanded .ED is greater than zero
and less than 1.

 Elastic demand, this type of elasticity of demand where a slight change in price leads to a larger
proportionate change in quantity demanded. Edis greater than one but less than infinity.
 Unit elasticity of demand ; this is when the percentage change in price z equal to the % change
in quantity demanded PED =1 Quantity demanded changes exactly as price change

 Perfectly elastic demand / infinite demand. When price elasticity is equal to infinity. The buyers
are prepared to buy all they can at the same time price.

MEASUREMENT OF PRICE ELASTICITY OF DEMAND :

(1) Percentage or Proportionate Method.

(2) Geometrical Method or Point Elasticity Method.

(3) Total Expenditure Method /Total Outlay Method.

(4) Arc Elasticity Method.

(1) Percentage or Proportionate Method :

• It is the most popular method of measuring Ed.

• Under this method, elasticity is measured by the ratio of proportionate

(percentage) change in quantity demanded to proportionate (percentage)

change in price.

• Formula –

Ed = % Change in Quantity

% Change in Price
OR

Ed = Proportionate Change in Quantity Demanded

Proportionate Change in Price

OR

Ed =

△𝑄

△𝑃

Note: Price and Quantity move in opposite direction. Therefore elasticity of

demand will always be negative, but for convenience minus sign is dropped.

Geometric Method/Point Elasticity:

1. Geometric method measures price elasticity of demand.

2. It is also called point method of measuring elasticity of demand.This method determines

elasticity of demand at different points along the same DC.

3. For this method, the straight line DC needs to be expanded to the x and y axis.

The point at which ed is to be completed, divides the DC into 2 parts- (a) lower sector (b) upper

sector.

4. Thus, ed = lower sector (i.e. lower segment)

Upper sector (i.e. upper segment)

5. Following fig details about elasticity at diff points

➔ ed = 1(unity): if point P is at the middle of the DC, then lower segment = upper segment

price

Accordingly: PN = 1

PM

➔ ed > 1 (greater than unity): At point A, ed = AN > 1 because AN > AM

AM

➔ ed < 1 (less than unity): At point B, ed = BN < 1 because BN > BM

BM

➔ ed = 0 (zero): At point N, where DC touches the x-axis, ed = O = 0

NM

➔ ed = ∞ (infinity): At point M, where DC touches the y-axis, ed = MN = ∞

* Total Expenditure method or Total outlay method or Relationship between elasticity f demand &

total expenditure.

1. Total expenditure = The quantity demanded x Price of good

2. TE = q(x) x p(x)

3. According to this method, elasticity of demand is measured by comparing total expenditure of the

commodity before and after the price undergoes change.

4. There may be 3 possibilities in this case:

a) → Elasticity of demand is greater than unity (ed > 1) or demand is elastic.

In this case, total expenditure increase with fall in price and decrease with rising price.

* Price & total expenditure move in opposite direction

b) Elasticity of demand is equal to unity (ed=1) or demand is unitary elastic.

When total expenditure remains the same with fall or rise in price, then ed derived = 1

In this case, the total expenditure does not change.

c) Elasticity of demand is less then unitary (ed < 1) or demand is inelastic.

When total expenditure decrease with fall in price and increase with rise in price.

The price and total expenditure move in same direction.

ARC ELASTICITY METHOD:

• When Price elasticity is to be found between two prices or two points on demand curve then

generally mid point method is used i.e. averages of two prices and quantities are taken (i.e

original and new) base. when price elasticity is to be found between two prices( or two points on the
demand curve say, A and B ) the

• The Arc Elasticity can be found using formula:

• ep =

𝑞1−𝑞2
𝑞1+𝑞2

𝑝1+𝑝2

𝑝1−𝑝2

Factors affecting elasticity of demand

a) Nature of commodity Necessity of goods: they are less than unitary elastic or inelastic demand eg:
salt, kerosene etc. Luxuries: they are greater than unitary elastic demand eg: AC, costly furniture
etc.Comforts: They are neither very elastic nor very inelastic demand, eg. Cooler, furniture etc.

b) Availability of substitutes Goods which have closer substitutes: Here, the elasticity of demand is
higher i.e. more elastic as when price of a commodity rises, the consumer has options of drifting to its
substitutes eg. Tea and coffee. Goods without close substitutes: These goods are less elastic in demand s
the consumer has no other option than that good eg. Cigarette, liquor. A commodity with many
substitutes has elastic demand since consumers shift from it when costs increased.

c) Diverse/variety of uses

A) Goods with many uses: The commodities which can be put to a variety of uses have

elastic demand as if the price of such good ↑, the demand is restricted for important

purposes eg. electricity, if its price increases, it’s use may be restricted to important uses

such as lighting.

B) Goods with less use: Its demand is likely to be less elastic eg. Paper

d) Postponement of use

A) The consumption of good which can be postponed, the demand will be elastic, eg:

demand for residential houses is postponed when interest rates on loans are high.

B) When consumption cannot be postponed, then it has less elastic demand.

e) Income level of the buyer:

A) Consumers with high level of income will not be bothered by a rise in price of

commodity. Thus ed is expected to be low, eg: demand for luxury cars by multibillionaires.

B) The demand of middle income consumer is more elastic, eg: demand for small cars by

middle class people in India.

f) Habit of consumer

If the consumer becomes accustomed/habitual for a commodity, then the demand will be

inelastic as he cannot reduce the demand even when the goods are highly taxed, eg:
cigarettes, liquor.

g) Proportion of expenses/proportion of Income spent on commodity Goods on which consumer does

not spend higher proportion of income, they will have inelastic demand, eg: needle, matchbox/ Goods
on which the consumer spends a larger proportion of their income, then the elasticity is high, eg: clothes
etc.

h) Price Level; Elasticity of demand will be high at higher level of price and lower at the lower level of
price.

i) Time period It is more elastic as consumer can change his consumption habits more

conveniently. Consumers take time to respond to price changes. Elasticity tends to be inelastic in a short
run and elastic in the long run. Short period: The demand is inelastic as the consumer cannot change the
consumption very easily.

Demand Forecasting
Meaning

➔ Forecasting of dd is art and science of predicting probable dd for product/service at

some future date on basis of certain past behaviour patterns.

➔ it is estimated scientifically on basis of certain facts.

Usefulness

➔ helps in planning & decision-making

➔ its importance has increased due to mass production and production in response to

demand

➔ good forecast enables firms to perform efficient business planning

➔ provides information for formulation of suitable pricing and advertisement strategies.

Types of Forecasts:

1. Macro Level Forecasting – It deals with general economic environment prevailing in the

economy as measured by Index of Industrial Production.

2. Industry Level Forecasting – It is concerned with the demand for a particular industry’s

product as a whole, say the demand for cement in India.

3. Firm Level Forecasting –It refers to forecasting the demand of particular firm’s product, e.g.

Demand for ACC Cement.

Based on Time Period:

1. Short Term Demand Forecasting covers a short span of time, depending of the nature of
industry. It is done usually for six months or less than one year.

2. Long Term Forecasts are for longer periods of time, say two to five years and more. It

provides information for major strategic decisions of the firm such as expansion of plant

capacity.

DEMAND DISTINCTIONS:

1. Producer’s Goods and Consumer’s Goods :

• Producer’s Goods are those which are used for the production of other goods –

either consumer goods or producer goods themselves. E.g. Machines, plants and

machine, etc.

• Consumer’s Goods are those which are used for final consumption. Eg. M,kReady made

clothes.

2. Demand for Durable Goods and Non-Durable Goods:

1. Non-Durable Goods are those which cannot be consumed more than once. Eg. Raw

Material, Fuel, etc.

2. Durable Goods do not quickly work out, can be consumed more than once and yield

utility T a period of time. E.g. Building, Plant and machinery, etc.

3. Derived demand and Autonomous demand:

• The demand for a commodity that arises because of the demand for some other

commodity called ‘parent product’ is called derived demand. For e.g. The demand

for cement is derived demand related building activity.

• If the demand for a product is independent of the demand for other goods, it is

called autonomous demand.

4. Demand for firm’s product and industry demand:

• The term industry demand is used to denote the total demand for the products of a

particular industry, e.g. total demand for steel in the country.

• The demand for firm’s product denotes the demand for the products of a particular

firm. Eg. Demand for steel produced by the Tata Iron and Steel Company.

5. Short Run and Long Run demand:

• This is distinguished on the basis of time.

METHODS OF DEMAND FORECASTING

1. SURVEY OF BUYER’S INTENTIONS :

• In this it is to be asked from the consumers what they are planning to buy during the year by

following methods :

(a) Complete enumeration method. This is a method where nearly all potential customers are
interviewed about there purchase plans.

(b) Sample Survey method under which only a scientifically chosen sample of potential customers are
interviewed

(c) End-Use Method, especially used in fore casting demand for inputs, involves identification of all final
users, fixing suitable tachnicals norms of consumption of the product under study, application of the
norms to the desired or targeted levels of output and aggregation.

• In this method the burden of forecasting is on the customers.

2. Collective Opinion Method :

• It is known as sales force opinion method or grass root approach.

• Firms have wide network of sales personal who can use their knowledge, experience and skills

of the sales force to forecast future demand.

• It is a simple method giving first hand information.

• This is a technique which can be used for short run.

3. EXPERT OPINION METHOD:

• Professional market experts and consultants have specialised knowledge about the numerous

variables that affect demand.

• Information is elicited through them in the form of interviews and questionnaires.

• Experts are asked to provide forecasts and the reasons for forecast.

4. STATISTICAL METHOD :

(a) TREND PROJECTION METHOD :Also known as classical method, it is considered as a naïve

approach. Such data when arranged chronologically is known as time series.

(i) Graphical Method: Also known as Free hand Projection method. The direction of curve

shows the trend. Drawback is that the data shown may not be reliable.

(ii) Fitting Trend equation :Least Square Method :It is a mathematical procedure for fitting
a line to a set of observed data points in such a manner that the sum of the squared

differences between calculated and observed value is minimised.

(b) Regression Analysis : It is most popular method of forecasting demand.Under this method a

relationship is established between the quantity demanded and the independent variables

such as income,price of good,price of related goods,etc.The equation will be in form of

Y = a+bX.

5. CONTROLLED EXPERIMENTS : Under this method, future demand is estimated by conducting

market studies and experiments on consumer behaviour under actual, though controlled, market

conditions. This method is expensive as well as time consuming. Also it is risky as they may lead to

unfavourable reactions from dealers, consumers and competitors.

6. BAROMETRIC METHOD OF FORECASTING :

This method is based on past experience and try to project the past into the future. Such

projections is not effective where there are economic ups and downs. This information is then

used to forecast demand prospects of a product though not actual quantity demanded.Just as

meteorologists use the barometer to forecast weather the economists use economic indicators