3.1 The determinants of the demand for goods and services
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4 Terms
what does the demand curve show
the relationship between price and quanitity demanded
why is the demand curve downward sloping
price and quantity are inversely related as at lower prices consumptiion will be higher
from the other perspective due to diminiing marginal utility when consumers consume more units the utility they gain decreases meaning they are less willing to pay a higher price
causes of shifts in the demand curve
changes in tastes and preferences
changes in income
prices of related goods (substitutes and complements)
expectations about future prices and conditions
how do expectations about future prices affect demand
if people expect prices to rise → they are more likley to buy now → shifting demand to the right → also increasing the price (speculation effect)