2.1 Demand

Market

Where people willing and able to purchase and provide a good or service can carry out an exchange.

Demand

The ability and willingness to purchase a quantity of a good or service at a certain price.

Individual Demand

The demand of one single person for a product.

Market Demand

The sum of all individual demands for a product at every price.

Law of Demand

States that there is an inverse relationship between the price of a good and the quantity demanded, assuming ceteris paribus.

Ceteris Paribus

The assumption that all other factors influencing demand remain constant.

Income Effect

When prices fall, consumers experience an increase in real income and purchasing power, allowing them to buy more.

Substitution Effect

As a product's price decreases, consumers shift purchases toward it because it becomes more attractive compared to substitutes.

Law of Diminishing Marginal Utility

As additional units of a good are consumed, the satisfaction derived from each additional unit decreases.

Utility

The satisfaction gained from consuming a good or service.

Change in Quantity Demanded

A movement along the demand curve caused by a change in the product's own price.

Change in Demand

A shift of the entire demand curve caused by a non-price determinant.

Normal Goods

Goods for which demand increases as consumer income rises.

Inferior Goods

Goods for which demand decreases as consumer income rises.

Substitute Goods

Two similar goods that can be used in place of each other.

Complementary Goods

Two goods that are typically purchased or used together.

Consumer Preferences

Driven by fashion or events; increased popularity shifts demand to the right, and decreased popularity shifts it to the left.

Number of Consumers

An increase in total consumers shifts the demand curve to the right, while a decrease shifts it to the left.

Consumer Expectations

Anticipations about future prices or income that influence current demand and shift the curve.