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Ch 3 - Demand 

  • Market: where buyers and sellers get together to trade

    • Housing market (goods and services)

    • Stocks (shares)

    • Factor (factors of production)

    • International markets (international currencies)

  • Demand: the quantity of a product which consumers are willing and able to buy

  • Quantity: numerical quantity of a product being demanded

  • Effective demand: by purchasing power, the purchaser has the money to pay for the product

  • Ineffective demand: do not have purchasing power

    • Law of demand: states that as the price of product falls, the quantity demanded will increase

  • Based on the graph, we can see these trends:

    • When the price goes up, there's a decrease in quantity demanded

    • When price goes down, quantity demanded increases

  • Factors influencing demand (PINTE):

    1. Income: the income of all consumers

      a. Income + demand have a positive relationship:

      • Increase in ability to pay equals increase in demand, If the ability to pay falls then less is demanded (direct relationship)

      • Inferior goods have a negative relationship (customers buy less, inverse relationship)

  1. Price:

    • Substitutes: alternative goods can satisfy the same want and need

      • A change in the price of one has an impact on the demand

    • Complements: goods which have a joint demand as they enhance the satisfaction derived from another good

      • A change in the price/availability of either will have an effect on the demand for complementary goods

  2. Fashion, taste, and attitude: demand is affected by personal behaviour /preference. As consumer behaviour and preference changes, so does the degree of demand of a good or service.

  • To increase demand:

    • Income rises (normal goods)

    • Price of substitution rises

    • Price of complementary falls

    • Encouraged buying

    • Population likely to buy increases

  • To decrease demand:

    • Income drops

    • Substitution falls

    • Compliments rises

    • Buying discouraged

  • PINTE:

    • Prices

    • Income

    • Number of buyers

    • Taste/preference

    • Expectations

  • Movement along the Demand curve:

    • Rise in price = drop in demand

    • Drop in price = increase in demand

  • A demand shift can shift:

    • Left (decrease demand)

    • Right (increase demand)

  • Based on the graph, we can tell that these changes occur in the economy:

    • D2: how quantity demanded responds to a change in prices

    • D1 and D2: shows how demand responds to a change in a non-price factor

  • Bounded rationality: theory that consumers have limited rational decision making driven by cognitive ability, time constraint, and imperfect information

    • Profit: total revenue - total costs

    • Status quo: overwhelming amount of choices

    • Complementary goods: demand decreases, quality demand decreases

    • Substitute goods: demand increases, quality demanded decreases

  • Basic rules of movement along the demand curve and what it means:

    • decrease in price = expansion in demand = increase in quality demanded

    • increase in price = contraction in demand = decrease in quantity demanded

Ch 3 - Demand 

  • Market: where buyers and sellers get together to trade

    • Housing market (goods and services)

    • Stocks (shares)

    • Factor (factors of production)

    • International markets (international currencies)

  • Demand: the quantity of a product which consumers are willing and able to buy

  • Quantity: numerical quantity of a product being demanded

  • Effective demand: by purchasing power, the purchaser has the money to pay for the product

  • Ineffective demand: do not have purchasing power

    • Law of demand: states that as the price of product falls, the quantity demanded will increase

  • Based on the graph, we can see these trends:

    • When the price goes up, there's a decrease in quantity demanded

    • When price goes down, quantity demanded increases

  • Factors influencing demand (PINTE):

    1. Income: the income of all consumers

      a. Income + demand have a positive relationship:

      • Increase in ability to pay equals increase in demand, If the ability to pay falls then less is demanded (direct relationship)

      • Inferior goods have a negative relationship (customers buy less, inverse relationship)

  1. Price:

    • Substitutes: alternative goods can satisfy the same want and need

      • A change in the price of one has an impact on the demand

    • Complements: goods which have a joint demand as they enhance the satisfaction derived from another good

      • A change in the price/availability of either will have an effect on the demand for complementary goods

  2. Fashion, taste, and attitude: demand is affected by personal behaviour /preference. As consumer behaviour and preference changes, so does the degree of demand of a good or service.

  • To increase demand:

    • Income rises (normal goods)

    • Price of substitution rises

    • Price of complementary falls

    • Encouraged buying

    • Population likely to buy increases

  • To decrease demand:

    • Income drops

    • Substitution falls

    • Compliments rises

    • Buying discouraged

  • PINTE:

    • Prices

    • Income

    • Number of buyers

    • Taste/preference

    • Expectations

  • Movement along the Demand curve:

    • Rise in price = drop in demand

    • Drop in price = increase in demand

  • A demand shift can shift:

    • Left (decrease demand)

    • Right (increase demand)

  • Based on the graph, we can tell that these changes occur in the economy:

    • D2: how quantity demanded responds to a change in prices

    • D1 and D2: shows how demand responds to a change in a non-price factor

  • Bounded rationality: theory that consumers have limited rational decision making driven by cognitive ability, time constraint, and imperfect information

    • Profit: total revenue - total costs

    • Status quo: overwhelming amount of choices

    • Complementary goods: demand decreases, quality demand decreases

    • Substitute goods: demand increases, quality demanded decreases

  • Basic rules of movement along the demand curve and what it means:

    • decrease in price = expansion in demand = increase in quality demanded

    • increase in price = contraction in demand = decrease in quantity demanded

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