The importance of demand in the Covid-19 era

The importance of demand in the Covid-19 era

First of all, we have to be clear about what is meant by demand. It is none other than the number of goods and services that consumers purchase at different price levels and according to a unit of time that can range from one day to one year, and so on. It is essential to incorporate the concept of the period because otherwise, we would not be able to observe whether demand is increasing or decreasing.

Undoubtedly, demand clearly affects the determination of the level of economic activity. This approach was already observed in the so-called Keynesian macroeconomics, although it did not introduce the concept of aggregate demand in this case.

Took a further step in the study of the influence of demand on the level of economic activity with the incorporation of the main postulations of New Keynesian macroeconomics, which already took the effect of aggregate demand into account.

Endogenous demand

The neoclassical economic theory takes consumer tastes and preferences as given. It seeks to determine the relative prices that match those tastes and preferences with the limited resources and technological capabilities available to satisfy them. At the microeconomic level, demand is considered exogenous since consumers’ tastes and preferences are given.

To the influence of the value of demand in the Covid-19 era, postulates such as the post-Keynesian ones fit in when considering that effective aggregate demand is a variable that determines the level of growth of the economy.

With all of the above, and at a fundamental level, one can understand the importance of taking care of demand in any society concerned with economic growth. The difficulty of a pandemic’s existence should significantly impact the search for increases in order (mainly internal). For this, the variable of efficiency in policy plays a significant role.

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