demand:

the amount that buyers are willing and able to buy (effective demand)

the law of demand:

the law of demand says price and quantity demanded are inversely related (e.g., the cheaper something is, the more we will buy)

• if the price of a good gets higher, we might:

  • buy less of it

  • do without it

  • buy something else (a substitute)

• if the prices of a good gets cheaper, we mightL

  • buy more of it

  • stop buying a substitute and buy this instead

factors that affect demand

• fashion/taste

• income

• price of substitutes (good in competitive demand)

• price of complements (good in joint demand)

• population

• advertising

• price of products

supply:

the amount of a product a firm is willing and able to supply a market at a given price

law of supply:

the price and quantity sold have a positive relationship (e.g., as the price increases, the firm looks to supply more)

factors that affect supply:

• cost of raw materials

• price selling at

• taxes

• cost of labour

• new technology

• weather

• changes in the size of the industry