Economics - Chapter Four, Section 2, Part 1 Notes

Ceteris Paribus: Latin for "All other things held constant."
The demand curve is only accurate as long as the ceteris paribus assumption holds true.
When the ceteris paribus assumption is dropped, movement no longer occurs along the demand curve. Instead, the entire demand curve shifts.

Quantity Demanded: the total amount of goods or services demanded at any given point.
- Depends on the price of a good or service in the marketplace, regardless of whether that market is in equilibrium.
Change (Increase / Decrease) in Quantity Demanded: caused only by a change in price; results in movement along the demand curve.

Change or Shift in Demand: caused by a change in factors other than price; results in a shift of the entire demand curve.

Several factors can lead to a change in demand:

Income
- Changes in consumers' incomes affect demand.
- A normal good is a good that consumers demand more of when their incomes increase.
- An inferior good is a good that consumers demand less of when their income increases.
Consumer Expectations
- Expectations of future price increases or decreases greatly affect our demand for that good today.
Population
- Changes in the size of the population also affect the demand for most products.
Consumer Tastes and Advertising
- Advertising plays an important role in many trends and therefore influences demand.

The demand curve for one good can be affected by a change in the demand for another good.