Artificial demand or manufactured demand constitutes

demand In economics, demand is the quantity of a goods, good that consumers are willing and able to purchase at various prices during a given time. In economics "demand" for a commodity is not the same thing as "desire" for it. It refers to both the desi ...

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

microeconomics Microeconomics is a branch of economics that studies the behavior of individuals and Theory of the firm, firms in making decisions regarding the allocation of scarcity, scarce resources and the interactions among these individuals and firms. M ...

(

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 (pump), in order to sell the cheaply purchased stock at a higher price (dump). O ...

strategy) and

advertising Advertising is the practice and techniques employed to bring attention to a Product (business), product or Service (economics), service. Advertising aims to present a product or service in terms of utility, advantages, and qualities of int ...

. 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 Government spending or expenditure includes all government consumption, investment, and transfer payments. In national income accounting, the acquisition by governments of goods and services for current use, to directly satisfy the individual or ...

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 professor and public intellectual known for his work in linguistics, political activism, and social criticism. Sometimes called "the father of modern linguistics", Chomsky is also a ...

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 or a powerful military industrial complex 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 include the diverse arrays of media that reach a large audience via mass communication. Broadcast media transmit information electronically via media such as films, radio, recorded music, or television. Digital media comprises b ...

advertising, which can create demand for

goods In economics, goods are anything that is good, usually in the sense that it provides welfare or utility to someone. Alan V. Deardorff, 2006. ''Terms Of Trade: Glossary of International Economics'', World Scientific. Online version: Deardorffs ...

, services, 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 put a lot of resources into advertising to create a 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 demand has increased relative to supply beca ...

, 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, investors versus speculators and institutional versus retail. Action in financial markets by central banks is usually regarded as intervention rather than participation. Sup ...

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 b ...

. This lures traders who entered into the original short position to purchase addition shares in an attempt to mitigate their losses, 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 the economic forces of supply and demand are balanced, meaning that economic variables will no longer change. Market equilibrium in this case is a condition where a market price is esta ...

price.

References

{{Reflist Advertising Anti-corporate activism Demand Social influence Public employment

Vehicles

Examples

See also

References