Direct Demand

direct demand

Demand for consumption products utility

Value

There are two basic models of individual demand. One, known as the theory of consumer behavior, relates to the direct demand for personal consumption products. This model is appropriate for analyzing individual demand for goods and services that directly satisfy consumer desires. The value or worth of a good or service, its utility, is the prime determinant of direct demand. Individuals are viewed as attempting to maximize the total utility or satisfaction provided by the goods and services they acquire and consume. This optimization process requires that consumers focus on the marginal utility (gain in satisfaction) of acquiring additional units of a given product. Product characteristics, individual preferences (tastes), and the ability to pay are all important determinants of direct demand.

derived demand

Demand for inputs used in production

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