What Is Demand? Microeconomics

For example, if the price increases, the customer might hesitate, and the willingness to buy decreases. Additionally, a decrease in income reduces the amount consumers can afford to buy (assuming price, and anything else that affects demand, is unchanged). When oil prices are high, fewer people are willing to pay the hefty price tag but some consumers, like airliners, depend so heavily on using oil for fuel, they are willing to pay a lot. Conversely, a fall in price will increase the quantity demanded. The total number of units purchased at that price is called the quantity demanded.

The result is that demand for all major fuels and energy technologies increased in 2024, with renewables covering the largest share of the growth, followed by natural gas. As a result, 80% of the increase in global electricity generation in 2024 was provided by renewable sources and nuclear, which together contributed 40% of total generation for the first time. The expanding supply of low-emissions sources covered most of the increase in global electricity demand in 2024.

Coherent’s revenues grew at an average three-year rate of 11.5% (vs. 5.8% for the S&P 500). While hardware players reap immediate infrastructure rewards, are software names experiencing a similar lift from the AI boom? Yes, Nvidia holds an equity stake and investment partnership validating its optics tech.

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The cost of generating electricity is the largest component of the price of electricity. Electricity prices generally reflect the cost to build, finance, maintain, and operate power plants and the electricity grid (the complex system of power transmission and distribution lines). Lee first cut his investing teeth on The Motley Fool bulletin boards (commonly referred to as the “Fool Boards,”) and he’s infinitely grateful to all of the investors he learned from in this powerful investing community.

• In that difference lies a coming sea change in how the US, Europe, and the world at large will consume power — and how much that will cost.
• Three tenths of one percent marks the effective range of pricing power the firm has because any attempt to raise prices by a higher percentage will effectively reduce quantity demanded to zero.
• AI helps with tasks, enabling people to fulfill their purpose and become more productive, making workers more valuable.
• EIA is explicit that increased output, especially from the Appalachian Basin, will require massive infrastructure build-out.

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More recently, the outlook for existing and future nuclear reactors has changed due to significant financial support from the federal government. Coal’s share of total U.S. energy consumption declined from about 37% in 1950 to 9% in 2023, largely because the U.S. electric power sector increased its use of other energy sources in place of coal. These increases have primarily been driven by large increases in solar and wind energy production. More efficient natural gas and oil well drilling and production techniques have resulted in increased natural gas production from shale and tight geologic formations. Natural gas consumption has increased both in amount and share of U.S. energy consumption.

Total annual U.S. crude oil production increased post-pandemic as U.S. oil producers what is demand generation responded to increased U.S. and world petroleum demand and oil prices. U.S. petroleum consumption decreased in 2020 during the COVID-19 pandemic and increased in subsequent years as the economy returned to pre-pandemic activity. DOE is leveraging its resources to meet increasing electricity demand while improving critical infrastructure and advancing American economic competitiveness. The rate of growth is causing issues as expectations by developers seeking power for data centers run into limitations by the utilities that provide that power, Bloom Energy found.

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While AI’s ultimate impact on society and the corporate bottom line will take time to determine, companies are pouring in capital to build a new global system of data centers for the modern economy. Construction of U.S. electricity infrastructure began in the early 1900s, driven by new technologies, central-station generating plants, and growing electricity demand, especially after World War II. These connections allowed utilities to share the economic benefits of building large and often jointly owned power plants to serve their combined electricity demand at the lowest possible cost. As electricity consumption increases, natural gas remains the backbone of reliable, affordable power.

Economists use the term demand to refer to the amount of some good or service consumers are willing and able to purchase at each price. A demand curve is almost always downward-sloping, reflecting the willingness of consumers to purchase more of the commodity at lower price levels. In equilibrium the quantity of a good supplied by producers equals the quantity demanded by consumers. Every increase of needs tends to increase one's dependence on outside forces over which one cannot have control, and therefore increases existential fear. In perfectly competitive markets the demand curve, the average revenue curve, and the marginal revenue curve all coincide and are horizontal at the market-given price. Diabetics need insulin to survive so a change in price would not effect the quantity demanded.

ERCOT’s electricity demand is forecast to grow faster than that of any other grid operator in the United States through at least 2026. During the summer months of June through September compared with an average of 12 GW of solar generation at noon in the summer months of 2023. Although it is still the largest source of electricity for ERCOT, natural gas-fired generation averaged 43% in the first nine months of 2025, compared with 47% in the first nine months of 2023 and 2024. Together, wind and solar generation met 36% of ERCOT’s electricity demand in the first nine months of 2025. Over those same months, ERCOT had the fastest electricity demand growth among U.S. electricity grids between 2024 and 2025. In the first nine months of 2025, electricity demand in ERCOT, which manages about 90% of the state's load, reached a record high compared with the same period in previous years.

More pipelines and other critical energy infrastructure will be needed to move natural gas from the East Coast to the U.S. As EID has previously examined, many data centers are seeking around-the-clock, dispatchable power, pointing to natural gas to meet that demand. EIA projects that gas-powered generation will increase from 35.2 billion cubic feet per day (Bcf/d) in 2025 to between 38.1 Bcf/d and 50.4 Bcf/d by 2050 in most cases. After more than a decade of flat electricity demand, U.S. power consumption is rising again—and natural gas is growing right alongside it.

The answer lies in a breakthrough so powerful it’s redefining how humanity works, learns, and creates. It’s a leap so massive, it could reshape how businesses, governments, and consumers operate worldwide. CEO Chris Womack said the company continues investing in infrastructure to support regional growth while focusing on reliability and stable rates for customers. Raymond James also pointed to improving financing clarity and potential upside as investment activity ramps. We then limited our final selection to companies that have recently reported noteworthy developments likely to impact investor sentiment.

Our weekly newsletter delivers the latest insights on economic forces shaping markets—from Goldman Sachs leaders, economists, and investors around the world. The information contained in this article does not constitute a recommendation from any Goldman Sachs entity to the recipient, and Goldman Sachs is not providing any financial, economic, legal, investment, accounting, or tax advice through this article or to its recipient. Global power demand from data centers, meanwhile, is forecast by Goldman Sachs Research to rise 165% by 2030 (from 2023 levels). Even as new facilities come online, occupancy rates remain near record highs for third-party leased data-centers across most US markets.

In a series of three reports, Goldman Sachs Research analysts lay out the US, European, and global implications of this spike in electricity demand. Along the way, the carbon dioxide emissions of data centers may more than double between 2022 and 2030. At present, data centers worldwide consume 1-2% of overall power, but this percentage will likely rise to 3-4% by the end of the decade. For years, data centers displayed a remarkably stable appetite for power, even as their workloads mounted. On average, a ChatGPT query needs nearly 10 times as much electricity to process as a Google search.

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“These companies are building the application layer above,” Huang said, “and they’re going to need infrastructure — and investment — to build this future.” The curve shows how the price of a commodity or service changes as the quantity demanded increases. For instance, the demand for cars in India has increased partly because people are able to get loans from the banks to purchase cars. While 56% of CEOs report no revenue increase or cost reduction from AI investments, a minority of organizations are achieving both through embedded workflows. The supply of natural gas-fired generation also increased steadily to cover rising electricity demand.