Understanding demand

demand

desire, ability, and willingness to buy a good/service

“law of demand” states that…

all other variables remaining the same, the higher the price, the less quantity demanded

what causes movement in demand curve?

change in the price of a product

what causes shifts in the demand curve?

a change in non-price factors

shift to the right indicates..

an increase in demand

shift to the left indicates…

a decrease in demand

what are the two types of movement within a demand curve?

expansion and contraction

list the 5 factors that cause a change in demand

• consumer income

• taste

• expectations

• related goods

• population
  (CTE-R(I)P)

there is a __ relationship between price paid and amount demanded

inverse

there is a __ relationship between the price and the amount supplied

direct

1. consumer income

the amount of money a consumer has that can affect their willingness to purchase certain items

consumer income - two types of goods

normal (shift to right) and inferior good (shift to left)

example of inferior good and normal good

instant noodles and restaurant meals

2. price of related goods

demand for goods can be affected by the price for related goods

two categories of related goods

complementary and substitute

examples of complementary and substitute goods

complementary - iphone and case, coffee and coffee beans
substitute - iphone and galaxy, coke and pepsi

when related goods fall, what happens to the demand of complementary products?

3. taste & advertising

changes in popularity meaning changes in the “dollar vote” of the consumer

example of taste and advertising

popularity (decrease) for 90’s rock band
popularity (increase) for drake

4. consumer expectations 

the way people anticipate changes in products, technology or the economy (iphone models, changes in body styles of cars)

5. population (number of buyers)

an increase/decrease in the number of consumers

which way does the demand shift if the volleyball grand final is announced

to the right

which way does the demand shift after the olympics

to the left