Demand

Law of Demand

Inverse relationship between price and quantity demanded. As the price for a good increase then the quantity demanded will decrease.

Two types of effects?

Substitutes Effect

There will be a higher demand for substitute goods than the og.

Demand Curve

Graphical representation of demand at various prices. Downward slop always, because of law of demand.

Change in price on demand curve

When there is a change in the price of the good (or service), then there will be a movement along the demand curve.

Consumer Sovereignty

Buyers influence production levels in the market.

Three factors affecting strength of demand go over

1 Availability of substitutes

2 Necessity (urgency) of purchase

3 Proportion of income spent on product

Non-price Factors

Elements other than price that affect demand, which shift the demand curve. Population, Price of substitutes or compliments, expected future prices, taste/preferences and income

Population Growth to demand?

Increased market size leads to higher demand.

Tastes and Preferences shift the demand curve?

When peoples tastes change to follow trends or changes within the economy, then demand for different goods will shift to follow the preferences of people. i.e the quantity demanded for a specific product.

Substitutes

Goods that can replace each other in consumption, to satisfy the same wants or needs.

Complements

Goods commonly purchased together.

Expected Future Prices

Anticipated price changes affect current demand. For example, If consumers expect the price to increase next week, then they are more likely to purchase petrol for a cheaper price this week.

Income

Goods takes up a larger percentage of income.as prices increase, the quantity demanded falls as goods may be pushed out of people's budgets.

Disposable Income (Yd)

Income available for spending after taxes.

Brand Substitution

Switching from one brand to another affects demand.

Why do consumers purchase more goods when the price is low?

Consumers have more purchasing power to spend more on G & S that satisfy more needs and wants.

Difference between an increase in quantity demanded and an increase in demand?

An "increase in quantity demanded" refers to a movement along a demand curve, which happens when the price of goods changes. An "increase in demand" means a shift of the entire demand curve, caused by factors non-price factors.

Individual market

Demand of a single person for a certain product within a market.

Market Demand

The combined demand of all individuals within a market.

Substitution effect

When a product becomes more expensive it no longer provides the same value for money. Alternatives/ substitutes available may be switched to.

Income effect

When the price of a product goes up, consumers buying the product will suffer a fall in the purchasing power or real value of their income.