What is Pent-Up Demand
Pent-up demand refers to an unusual sharply increasing demand for a product or service (or to do something). The pent-up demand is a result of a situation that the customers need to stop their spending due to some situation, once they are able to spend again it resulted in unusually large demand compared to the ordinary.
Normally, pent-up demand occurs after an economic recession and economic depression. This is because during an economic recession and depression customers tend to hold their money due to economic uncertainty (especially with luxury goods).
To put it simply, pent-up demand is following a period of decreased spending. In other words, the pent-up demand is the return of customers.
Key Points
- Pent-up demand refers to an unusual sharply increasing demand for a product or service after the customers need to stop their spending.
- The pent-up demand is also known as the pending demand.
- On the downside, pent-up demand sometimes causes the products to supply shortage and oversupply.
Examples of Pent-Up Demand
A good example of pent-up demand is during the covid recession during 2019 to 2021 (and maybe further in many countries) people must quarantine due to the pandemic. At that time, people delay spending since they had no idea where and when it end.
Once the lock-down is over and customers feel more comfortable with the state of the economy, consumers will start spending at a higher rate because of the pent-up demand for the goods or services. The increased rate of spending creates a cycle of increased economic activity. This will lead to a very high level of demand that surges on the market at once.
On the downside, pent-up demand sometimes causes the products to become unavailable since there is a sharply increasing demand after a no-demand period. However, the company that produces more products to supply the pent-up demand needs to be wary, once demand falls back to normal levels the overproduced product will become dead stock.
