The word "demand " is used in our everyday speech in a variety of ways, but in economics it has a particular significance which we shall attach to it hereafter. The mere desire for goods does not lead to the satisfaction of wants, though desire is the first step in that direction. Practically every one, we may safely say, desires to own an automobile; yet it is a well-known fact that only a small per cent of the people of the United States enjoy that distinction. In other words, to change slightly a well-known expression; "If desires were horses, beggars would ride." Obviously, then, the desire for a good may or may not result in the acquisition of that good. Something more is needed. The desire must be made effective; and when a desire becomes effective we call it demand. Thus, we can define demand as effective desire.

The question may properly be asked at this point: When does a desire become effective - that is, when does a desire become a demand ? A complete answer to the question will be found a little later in the discussion of demand, for it involves the principle underlying price. We can, however, at this stage in our progress, say that the demand for a good emerges when the one who desires to possess it is willing and able to produce the good directly or to forego the use of some other good or goods which he may exchange for it. Suppose, for example, that a shipwrecked man, like Robinson Crusoe, desires some sort of protection against the sun, such as an umbrella. He might, as he suffered from the heat, continue to desire an umbrella without having a demand for it. Suppose again that he should conceive the idea of constructing one from materials recovered from the wreck and that he was fully aware of the labor involved. Even then there would be no demand. If, however, he actually constructs the umbrella, we may conclude that his desire has become effective - that is, it has become a demand.