In microeconomics, which two factors are necessary for demand (as opposed to mere desire) to exist in a market?

• A. A high income and a low price
• B. Many sellers and product differentiation
• C. A government subsidy and price controls
• D. A willingness to buy and an ability to pay

Answer: (D)

Verified step by step guidance

1. Understand the concept of demand in microeconomics: Demand refers to the quantity of a good or service that consumers are both willing and able to purchase at various prices over a given period.
2. Distinguish between 'desire' and 'demand': Desire alone means wanting a product, but demand requires that consumers have the financial means (ability to pay) and the willingness to buy the product at a given price.
3. Identify the two key factors for demand: (1) Willingness to buy, which reflects consumer preferences and motivation, and (2) Ability to pay, which means having sufficient income or resources to purchase the good or service.
4. Recognize that other options like 'high income and low price' or 'many sellers and product differentiation' relate to market conditions but do not define demand itself.
5. Conclude that for demand to exist in a market, consumers must both want the product (willingness) and be able to afford it (ability), which together distinguish demand from mere desire.