Chapter 4 - Demand

Market

A group of buyers and sellers of a particular good or service

Competitive market

Has many buyers and sellers, they can’t influence the price of a good

Quantity demanded

The amount that consumers are willing and able to purchase at a particular price at a particular time

Law of demand

As the price of a good goes up, the quantity demanded falls

Perfect “pure” competition characteristics

“P-I-L-E”

Neither buyers or sellers have an influence on the price

Goods are identical

Lots of buyers and sellers

It’s relatively easy to enter and exit the market

Individual demand

Personal preference/limit (the demand curve for one person)

Market demand

When you add together everybody’s demand curve, represents all buyers in the market

Demand shifters

S-E-P-T-I-C-S

SUBSTITUTES - goods that can be bought in place of another good

EXPECTATIONS - if we expect the price to change in the future demand will change now (if we expect the price to go up in the future, we will buy more now)

POPULATION (size of market) - the number of buyers. The more buyers that demand curve will shift right

TASTE(S)

INCOME

COMPLEMENTS - goods that are bought together (the price/demands of one good affects the other good)

SPECIAL CIRCUMSTANCES - sporting events, seasons, or other things that will shift the demand curb

Inferior good

When your income goes down, you buy more. Ex: bus rides

Normal good

When your income goes up you buy more