Artificial Demand

Useful Definitions

• Demand
  In economic terms demand is what people are willing to pay to obtain (or rid themselves of) a particular good (bad) or service (disservice).
  
  
• Need
  Need is what one must have, because it is necessary for survival. In economic terms: needs are goods and services that demonstrate low elasticity of demand. In other words large changes in the cost of obtaining the needed good or service have little effect on demand.
  
  
• Want or desire
  Want or desire is defined as something that is not necessary for survival, but for which one is willing to sacrifice a part of his income, wealth, or leisure to obtain. In economic terms: desired goods that are not needed are referred to as luxury goods and demonstrate high elasticity ofdemand. In other words small changes in the price of a particular good or service are likely to affect demand in a dramatic way.
  
  
• Price elasticity and inelasticity
  Unfortunately that which we desire is not always good for us. For example, many people who smoke cigarettes smoke them, because they are addicted to nicotine, not because the act of smoking is pleasurable.
  
  So long as the addiction persists the individual willingly makes important sacrifices to obtain cigarettes. Thus, cigarettes are price inelastic because a dramatic rise in their price has little effect on the number purchased by individuals and society as a whole.
  
  In the moment the addiction stops, the need for nicotine disappears and cigarettes take on the quality of a luxury good with high price elasticity of demand. Indeed, an occasional smoke can even be pleasurable.
  
  
• False need
  hypothesis testing (rate of attrition)
  
  False need is the opposite of true need. It is the desire for something to which we attribute more value than it is truly worth. Young adults or adolescents often smoke as a mark of maturity. They watch renowned actors smoke on television and in movies, and seek to emulate them by imitating their behavior. As the adolescent 's desire for cigarettes is based only on the "suave image" that he believes he projects, rather than the long term consequences of his eventual addiction; he gladly sacrifices a portion of his wages or allowance to appear cool. Because the young smoker only sees the "positive side" of his/her smoking, he/she overestimates the true worth of cigarettes, over indulges, and becomes addicted.