Artificial demand
{{Short description|Creation of economic demand by deliberately influencing consumers}}
Artificial demand or manufactured demand constitutes demand for something that, in the absence of exposure to the vehicle of creating demand, would not exist. It has controversial applications in microeconomics (pump and dump strategy) and advertising.{{cite news |last1=Strange |first1=Adario |title=Why Apple Loves Gold |url=http://mashable.com/2015/04/25/why-apple-loves-gold/ |access-date=September 11, 2015 |publisher=Mashable |date=April 15, 2015}}{{cite news |last1=Trefis Team |title=Looking At The Significance Of Sirius XM's Latest $2 billion Share Repurchase Program |url=https://www.forbes.com/sites/greatspeculations/2015/09/02/looking-at-the-significance-of-sirius-xms-latest-2-billion-share-repurchase-program/ |access-date=September 11, 2015 |work=Forbes |date=September 2, 2015}}
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.{{cite journal |last1=MacGregor |first1=C. C. |date=February 2000 |title=Economic Theory and Physician Behavior in Bariatric Surgery |url= |journal=Obesity Surgery |publisher=Springer |volume=10 |issue=1 |pages=4–6 |doi=10.1381/09608920060674012 |pmid=10715635 |s2cid=5291713}} Government spending with the primary purpose of providing jobs (rather than delivering any other end product) has been labelled "artificial demand".{{cite web |url=http://www.american-consensus.org/resources/econ/prereq_economics.html |title=Real Demand is Not Artificial |year=2008 |website=www.american-consensus.org |publisher=American Consensus |access-date=2016-07-17 |archive-date=2016-03-03 |archive-url=https://web.archive.org/web/20160303191702/http://www.american-consensus.org/resources/econ/prereq_economics.html |url-status=dead }} Similarly Noam Chomsky has suggested that unchecked militarism 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",{{Cite web |url=http://www.zcommunications.org/if-we-hope-to-do-something-serious-to-avert-nuclear-catastrophe-we-must-be-willing-to-face-certain-a-by-noam-chomsky |title=ZQuote |date=2013-03-09 |website=www.zcommunications.org |archive-url=https://web.archive.org/web/20130309142851/http://www.zcommunications.org/if-we-hope-to-do-something-serious-to-avert-nuclear-catastrophe-we-must-be-willing-to-face-certain-a-by-noam-chomsky |archive-date=March 9, 2013 |access-date=2016-07-17}} with military Keynesianism or a powerful military industrial complex amounts to the "creation of state-guaranteed markets for high technology waste (armaments)."{{Cite web |url=http://peacemagazine.org/archive/v03n4p33.htm |title=Peace Magazine v03n4p33: Chomsky: Our System Depends on Arms Race |website=peacemagazine.org |access-date=2016-07-17}}{{Cite book |url=https://books.google.com/books?id=vMNL70nUuvAC |title=On Power and Ideology |last=Chomsky |first=Noam |date=1990-01-01 |publisher=Black Rose Books Ltd. |isbn=9780921689041 |pages=106 |language=en |access-date=2016-07-17}}{{cite book |url=https://archive.org/details/languagepolitics00noam |url-access=registration |title=Language and Politics |last=Chomsky |first=Noam |date=2004-01-01 |publisher=AK Press |isbn=9781902593821 |pages=[https://archive.org/details/languagepolitics00noam/page/614 614] |language=en |access-date=2016-07-17}}{{Cite book |url=https://archive.org/details/piratesemperorso00chom |url-access=registration |title=Pirates and Emperors, Old and New: International Terrorism in the Real World |last=Chomsky |first=Noam |date=2002-01-01 |publisher=South End Press |isbn=9780896086852 |pages=xi |language=en |access-date=2016-07-17}}{{Cite book |url=https://books.google.com/books?id=X5SeXA4eNfQC |title=The Culture of Terrorism |last=Chomsky |first=Noam |date=1988-01-01 |publisher=Black Rose Books Ltd. |isbn=9780921689287 |pages=26 |language=en |access-date=2016-07-17}}
Vehicles
Vehicles of creating artificial demand can include mass media advertising, which can create demand for goods, services, political policies or platforms.{{cn|date=October 2019}} Good mass media advertising can stimulate consumers' appetites and attract spending.Thomas Russell,(2004),"Advertising creates demand for items",Furniture Today,Vol.28 (41), p.23. 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.Reo Song ; Sungha Jang ; Gangshu (George) Cai,(2016),"Does advertising indicate product quality? Evidence from prelaunch and postlaunch advertising in the movie industry", Marketing letters,Vol.27 (4), p.791-804. 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, investors anticipate a fall in the share price and short the share. Meanwhile, retail investors purchase the limited supply, immediately increasing the demand which in turn sharply increases the price of the asset.{{Cite journal|last=Lamont|first=Owen A.|date=2012-06-01|title=Go Down Fighting: Short Sellers vs. Firms|journal=The Review of Asset Pricing Studies|volume=2|issue=1|pages=1–30|doi=10.1093/rapstu/ras003|issn=2045-9920|doi-access=free}} 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 price.