Demand

Demand - desire, ability, willingness to buy a good or service at all prices, sum of all quantities demanded

quantity demanded - desire ability willingness to buy a good or service at 1 price

a change in prices causes change in demand, causes movement along the curve

Derived Demand - a good or service is based on its contribution on the final product, demand for inputs is driven by demand for outputs, acts like a determinant

Demand Determinants

a change in underlying economic conditions (reflected by change in demand determent) causes change in demand (causes a shift)

P Price of substitutes or compliments

    substitutes - competitors ex in n out vs whataburger

    compliments - goods that work together ex ketchup and fries

O Outlook

    customer exception of future income / prices

I Income

    positively correlated with normal goods, negatively correlated with inferior     goods (good that consumers buy at lower income levels ex cup noodles)

N Number of potential customers

    population growth, immigration, emigration

    demand will decrease when potential customers decrease

    demand will increase when potential customers increase

T Taste

    fad or fashion

    everyone is affected even if not interested

P - Decrease in price of substitute increase in price of compliments

O - decrease in expected future income, expect future price to decrease

I - as income decreases demand for normal goods and services decrease

as income increases demand for goods and inferior services decrease

N - less ppl

increase in demand (rightward = more)

P - Increase in price of substitute decrease in price of compliments

O - increase in expected future income, expect future price to increase

I -

N - more ppl

law of demand - consumers prefer to buy more at lower prices rather than higher prices

law of supply -producers prefer to produce at higher prices rather than lower prices

where supply and demand intercept is market equilibrium

3 tasks of price system

rationing of goods / services (outputs who?) -

allocation of limited resources (inputs how?) -

determination of wages (input how?) -