We Let Each Other Know What We Want
This is part 1 of answering the question: How do millions of strangers cooperate?
One Takeaway
Demand isn’t a number. It’s a reflection of what people value.
Your Wants Matter
What people want, and are willing to pay for, is one of the most important forces in economics. We call this demand, but it’s really just a formal way of saying: people act on what they value.
Demand reflects purposeful, individual decisions. It’s not a single number or a graph. It’s what happens when real people weigh their options, compare trade-offs, and try to get more of what they want in life. Understanding demand starts with understanding people’s wants and actions.
What Is Demand?
Demand describes the amount of a good or service that people are both willing and able to buy at different prices. It connects desire with action. Wanting something isn’t enough. You need to want it and be in a position to get it.
But demand is more than the willingness to buy. It’s shaped by:
Preferences
Circumstances
Resources
Expectations
What someone demands today may be very different from what they demanded yesterday, or will tomorrow.
Value Is Personal
The foundation of demand is subjective value. A good has no value in itself. Its worth depends on how well it helps someone achieve a specific goal in a specific moment.
A bottle of water is almost worthless to someone walking past a dozen water fountains. It’s priceless to someone stranded in the desert.
A concert ticket might mean everything to a devoted fan and nothing to someone who’s never heard the band before.
This is why demand is so dynamic, and why no one can determine with certainty what people should want.
The Law of Demand
As the price of a good goes up, people usually buy less of it. As the price falls, they tend to buy more. This is what is known as the law of demand. It’s a fact of our world because people face trade-offs. Higher prices make people pause and ask, “Is this really worth it? Or should I hold off, buy less, or switch to something else?”
The key is we don’t demand goods in isolation. We demand them relative to everything else we could be doing with our time or money.
Thinking on the Margin
Demand is shaped by marginal thinking. The value of that next unit of some good tends to go down when compared with the previous one. A great example is pizza. Each slice of pizza satisfies a less important hunger or want.
The first slice hits the spot when you’re really hungry. That’s your most urgent need.
The second slice is still tasty, but less necessary.
By the third or fourth, you’re starting to feel full.
Eventually, another slice isn’t just less satisfying. It might make you uncomfortable.
Each new unit of a good brings less satisfaction than the one before. Since each new unit takes care of a less important want, your willingness to pay the same amount for each additional unit goes down.
You might be willing to pay $4 for the first slice because you’re starving. But you wouldn’t pay $4 each for a second or third. If the price dropped to $2, maybe you’d go for two slices. If it dropped to $1.50, maybe three. As the price falls, you become more willing to take care of those less urgent wants, so your quantity demanded increases.
What Influences Demand?
People’s willingness to buy something depends on more than price. A few major factors include:
Income: More income expands options and can change preferences.
Substitutes: If coffee becomes expensive, you might switch to tea.
Complements: If gas prices go up, demand for gas-guzzling cars might fall.
Expectations: If you think prices will eventually rise, you might buy more now.
Trends and Tastes: Fashions change, and so do desires.
Population: More people = more potential demand.
These aren’t static. They change constantly, which means demand is always evolving.
Demand as a Signal
When lots of people value a good and are willing to pay for it, that demand sends a signal. It tells producers: make more of this. When demand falls, it sends a different message: do something else.
Demand doesn’t just reflect what people want. It directs resources toward what they value most.
The Bottom Line
Demand is human. It reflects our needs, preferences, and goals in real time. It helps guide production, signal scarcity, and align resources with value. And since people are always changing, so is demand.