1.2 Demand

Demand

The quality of good or serive that consumers are willing and able to buy at a given price over a period of time.

Law of Demand

There is an inverse (negative) realtionship between price and the quantity demand.

What is realationship between Price and Quantity Demand?

Price goes up = Quantity Demand decreases

Price goes down = Quantity Demand increases

(*Price determines Quantity Demand*)

“surplus parabus“

Means all else equal/the same

What are the 2 main types of Demand?

Effective Demand

Latened demand

Effective Demand

The willingness AND ability to buy a good/service

Latened Demand

Eiether the willingness OR abilityto buy a good/service (NOT BOTH).

Main determinent of Quantity Demand

Price

What is the realtionship between the Price and the Demand Curve?

If price goes up = extension along the curve

If price goes down = conraction along the curve

Decribe How Extension and Contraction along the curve looks like.

What 2 mian effects cuase a curve to downward slope?

Income effect

Substitution effect

Income effect

A fall in price incraese the purchasing power of consumers so they can buy more quantity with a given budget.

Substituion effect

A fall in price for a good (good ‘x’) makes it realtively cheaper compared to substitutes, some will switch to good ‘x’ leading to a higher quantity demand of good ‘x’.

What are the non price determinants of demand?

T - Tastes and preferences (more popularity = more quantity demand)
O - Other good prices
E - Expectatoin of Future Prices
I - Incomes

S - Size of Market

How do Tastes and Preferences affect demand?

More popularity = Quantity demand goes up

How do the prices of other goods prices?

Substitute Good (price goes down and quantity demand goes up)

Complementary Goods (price goes down and quantity demand goes down)

How does expectation of future prices affect demand?

Demand now goes up in the future accordig to expectations

How does Income affect Demand?

When Imcome goes up poeple have m