Demand Schedules & Demand Curves

Demand Schedule

The relationship between price of product and quantity of the product demanded

Quantity Demanded

Amount of a good/service consumers are willing to purchase at a particular price

Demand curve

Shows relationship between price and demand

Law of Demand

Inverse relationship of price of product and quantity demanded; as price increases, quantity demanded decreases.

Ceteris Paribus Condition

when analysing the relationship between two variables, other variables must be held constant, such as income. This condition ensures that any observed effects on demand or supply are solely due to changes in price, allowing for a clearer understanding of the relationship.

What explains the Law of Demand

The substitution and income effect

What is the substitution effect

The change in quantity demanded of a good due to a change in its price relative to substitute goods, leading consumers to replace more expensive items with cheaper alternatives.

What is the income effect?

The change in quantity demanded of a good resulting from a change in consumers' purchasing power due to a change in the good's price, affecting their ability to buy more or less of the good.

How can the Market Demand shift?

If consumers decide to buy less of a product, it will shift to the left. If they decide to buy more of a product, it will shift to the right.

Variables (other than price) that influence market demand

Income

Prices of related goods

Tastes

Population + Demographics

Expected Future Prices

Income

income that customers have available to spend affects their willingness to buy goods/service

(If household income increases, the demand for quantity increases - shifting curve to the right)

Normal good

A good or service that people buy more of when they have more money (demand increases), and less of when they have less money (demand decreases).

Inferior good

A good or service that people buy more of when their income is lower (demand increase), and buy less of when their income is higher (demand decrease).

Price of related goods

The cost of goods that can affect the demand for another good. When the price of a substitute rises, demand for the original good increases, while a decrease in the price of a complement can increase demand for the related good.

Complements

Goods that are consumed together, where an increase in the price of one leads to a decrease in demand for the other. For example, peanut butter and jelly.

Tastes

Preferences or likes of consumers that can influence demand for a good or service. Changes in consumer tastes can lead to an increase or decrease in demand.

Population and demographics

The characteristics of a group of people, including factors like age, race, gender, income, and education. As population increases, number of consumers increase (increasing demand)

Expected Future prices

The prices that consumers anticipate will prevail in the future, influencing their current demand for goods and services. If consumers expect prices to rise, they may increase current demand.

What is a change in demand

shift on the demand curve due to other factors than price such as changes to consumer preferences.

What is change in quantity demand

Movement along the demand curve as a result of price changes

Show the change in demand and change in quantity demand:

If the price of tablet computers falls from $700 to $600, the result will be a movement along the demand curve from point A to point B—an increase in quantity demanded from 3 million to 4 million. If consumers’ incomes increase, or another factor changes that makes consumers want more of the product at every price, the demand curve will shift to the right—an increase in demand. In this case, the increase in demand from D1 to D2 causes the quantity