Artificial demand constitutes

demand In economics, demand is the quantity of a good that consumers are willing and able to purchase at various prices during a given time. The relationship between price and quantity demand is also called the demand curve. Demand for a specific item ...

for something that, in the absence of exposure to the vehicle of creating demand, would not exist. It has controversial applications in microeconomics (

pump and dump Pump and dump (P&D) is a form of securities fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements, in order to sell the cheaply purchased stock at a higher price. Once the operat ...

strategy) and

advertising Advertising is the practice and techniques employed to bring attention to a product or service. Advertising aims to put a product or service in the spotlight in hopes of drawing it attention from consumers. It is typically used to promote a ...

. A demand is usually seen as artificial when it increases consumer utility very inefficiently; for example, a physician prescribing unnecessary surgeries would create artificial demand. Government spending with the primary purpose of providing jobs (rather than delivering any other end product) has been labelled "artificial demand". Similarly

Noam Chomsky Avram Noam Chomsky (born December 7, 1928) is an American public intellectual: a linguist, philosopher, cognitive scientist, historian, social critic, and political activist. Sometimes called "the father of modern linguistics", Chomsky i ...

has suggested that unchecked

militarism Militarism is the belief or the desire of a government or a people that a state should maintain a strong military capability and to use it aggressively to expand national interests and/or values. It may also imply the glorification of the mili ...

is a type of government-created artificial demand, a "system of state planning ... oriented toward military production, in effect, the production of high technology waste", with

military Keynesianism Military Keynesianism is an economic policy based on the position that government should raise military spending to boost economic growth. It is a fiscal stimulus policy as advocated by John Maynard Keynes. But where Keynes advocated increasing ...

or a powerful

military industrial complex A military, also known collectively as armed forces, is a heavily armed, highly organized force primarily intended for warfare. It is typically authorized and maintained by a sovereign state, with its members identifiable by their distinct ...

amounts to the "creation of state-guaranteed markets for high technology waste (armaments)."

Vehicles

Vehicles of creating artificial demand can include

mass media Mass media refers to a diverse array of media technologies that reach a large audience via mass communication. The technologies through which this communication takes place include a variety of outlets. Broadcast media transmit informati ...

advertising, which can create demand for

goods In economics, goods are items that satisfy human wants and provide utility, for example, to a consumer making a purchase of a satisfying product. A common distinction is made between goods which are transferable, and services, which are not t ...

services Service may refer to: Activities * Administrative service, a required part of the workload of university faculty * Civil service, the body of employees of a government * Community service, volunteer service for the benefit of a community or a p ...

, political policies or platforms. Good mass media advertising can stimulate consumers' appetites and attract spending. With the shortening of product lifecycles, companies in many industries spend a lot of advertising to create huge initial demand for a product before postlaunch. Advertising influences demand by creating desire for a product or brand in consumers' minds.Christian Fisher,"Advertising's Effects on Demand",azcentral.

Examples

In a

short squeeze In the stock market, a short squeeze is a rapid increase in the price of a stock owing primarily to an excess of short selling of a stock rather than underlying fundamentals. A short squeeze occurs when there is a lack of supply and an excess of ...

, investors anticipate a fall in the

share price A share price is the price of a single share of a number of saleable equity shares of a company. In layman's terms, the stock price is the highest amount someone is willing to pay for the stock, or the lowest amount that it can be bought for. B ...

and short the share. Meanwhile,

retail investor There are two basic financial market participant distinctions, investor vs. speculator and institutional vs. retail. Action in financial markets by central banks is usually regarded as intervention rather than participation. Supply side vs. ...

s purchase the limited supply, immediately increasing the demand which in turn sharply increases the price of the

asset In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that can ...

. This lures traders who entered into the original short position to purchase addition shares, in an attempt to mitigate their loses which creates additional demand and increases the share price further. Eventually, the share price will fall back to its

market equilibrium In economics, economic equilibrium is a situation in which economic forces such as supply and demand are balanced and in the absence of external influences the ( equilibrium) values of economic variables will not change. For example, in the st ...

price.

References

{{Reflist Advertising Anti-corporate activism Demand Ethically disputed business practices Social influence Public employment

Vehicles

Examples

See also

References