|
|
M3: The wide-range monetary aggregate for the U.S. economy containing the combination of M2 (currency, checkable deposits, and assorted savings deposits) and large-denomination, institutional near monies. M3 contains financial assets that are relatively liquid, but not quite as liquid as those found in M1 or M2. The near monies added to M2 to derive M3 include large denomination certificates of deposit, institutional money market mutual funds, repurchase agreements, and Eurodollars. M3 is one of three monetary aggregates tracked and reported by the Federal Reserve System. The other two are designated M1 and M2.
Visit the GLOSS*arama
|
|
|
|
                           BUYERS' EXPECTATIONS, DEMAND DETERMINANT: The expectations that buyers have concerning the future price of a good, which is assumed constant when a demand curve is constructed. Buyers' expectations are one of five demand determinants that shift the demand curve when they change. The other four are buyers' income, buyers' preferences, other prices, and number of buyers. The decision to purchase a good today depends on expectations of future prices. Buyers seek to purchase a good at the lowest possible price. If they expect the price to rise in the future, they are inclined to buy more now. If buyers expect the price to decline in the future, they are inclined to buy less now.Looking to the FutureBuyers make buying decisions based on a comparison of current and future prices. They are motivated to purchase the good at the lowest price possible. If that lowest price is the one existing today, then they will buy today. If that lowest price is expected to occur in the future, then they will wait until later to buy.Consider the example of Wacky Willy Stuffed Amigos, a cute and cuddly line of stuffed creatures. Buyers decide how many Stuffed Amigos to buy, at a given current price, based on their expectations of future prices. - Price Going Higher: Suppose that news media throughout the country report on the prospects of a worldwide shortage of stuffing, the same sort of stuffing used to stuff Wacky Willy Stuffed Amigos. Every expert interviewed projects that the higher stuffing prices will most assuredly cause an increase in the price of Stuffed Amigos. The price increase has not yet occurred, but it most assuredly will occur. Everyone expects it to occur. With this news, anyone pondering the purchase of Wacky Willy Stuffed Amigos will be inclined to make their purchase now, without delay. As such, the current demand increases.
- Price Going Lower: Alternatively, suppose that The Wacky Willy Company, the firm that produces Wacky Willy Stuffed Amigos announces that it has developed a new production technique, that when implemented will allow them to sell Stuffed Amigos at half their current price. This news is greeted enthusiastically by Stuffed Amigos collectors. They expect to purchase Stuffed Amigos at a lower price in the near future. With this news, anyone pondering the purchase of Wacky Willy Stuffed Amigos today will likely postpone their purchase until later, at the lower price. As such, the current demand decreases.
Shifting the Demand Curve| Buyers' Expectations | 
|
A change in buyers' expectations causes the demand curve to shift. This can be illustrated using the negatively-sloped demand curve for Wacky Willy Stuffed Amigos presented in this exhibit. This demand curve captures the specific one-to-one, law of demand relation between demand price and quantity demanded. Buyers' expectations are assumed to remain constant with the construction of this demand curve.Now, consider how changes in buyers' expectations shift the demand curve. - Expecting Higher Prices: If buyers expect that the price of the good will be increasing in the future, they are likely to buy more today. This causes an increase in demand and a rightward shift of the demand curve. Click the [Expect Higher] button to demonstrate.
- Expecting Lower Prices: If buyers expect that the price of the good will be decreasing in the future, they are likely to buy less today. This causes a decrease in demand and a leftward shift of the demand curve. Click the [Expect Lower] button to demonstrate.
The Financial Power of ExpectationsBuyers' expectations (especially when combined with sellers' expectations) play a critical role in the markets for numerous goods. At the very top of this list is the whole assortment of financial markets, especially the stock market. Those who buy and sell corporate stock do so largely based on expectations of future stock prices.For example, Winston Smythe Kennsington III, noted Shady Valley financial guru, might be willing to pay $50 each for a few thousand shares of OmniConglomerate, Inc. stock today if he expects that the price will exceed $50 in the future. Alternatively, he might be inclined to sell his shares of OmniConglomerate, Inc. stock today if he expects that the price will fall below $50 in the future.
Recommended Citation:BUYERS' EXPECTATIONS, DEMAND DETERMINANT, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2017. [Accessed: June 28, 2017].
Check Out These Related Terms... | | | | | | |
Or For A Little Background... | | | | | | | | | | |
And For Further Study... | | | | | | | |
Search Again?
Back to the WEB*pedia
|
|
|
BEIGE MUNDORTLE
[What's This?]
Today, you are likely to spend a great deal of time lost in your local discount super center looking to buy either a wall poster commemorating the first day of winter or blue cotton balls. Be on the lookout for gnomes hiding in cypress trees.
Your Complete Scope
This isn't me! What am I?
|
|
|
A half gallon milk jug holds about $50 in pennies.
|
|
|
"I do not believe in a fate that will fall on us no matter what we do. I do believe in a fate that will fall on us if we do nothing. " -- Ronald Reagan, 40th US president
|
|
AIBD
Association of International Bond Dealers (now called International Securities Market Association)
|
|
|
Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.
User Feedback
|
|
