Demand

Demand definition

The quantity of a good or service that consumers are willing to pay for it at a given price

Demand curve

A graph showing how the quantity demanded of a commodity or service varies with it’s price

Factors that cause a shift in demand

• Changes in consumer incomes

• Changes in tastes/preferences

• Future price expectations

• Number of consumers

• Changes in the price of substitute and complement goods

Substitute goods

Goods/services that can be used instead of another one e.g. buying a laptop instead of a computer

Complement goods

Goods/services that are frequently consumed together e.g. cereal and milk

Substitution effect

As the price of a good increases, other products become cheaper in comparison. This will cause more customers to purchase the substitute instead.

Income effect

Links changes in prices to consumer spending

Law of diminishing marginal utility

Suggests that consumers will place a lower value on a product as they consume more of it