Markets, Law of Demand

; refers to a place where buyers (demand, consumers) and sellers (supply, businesses) meet.

Demand

• The Law of Demand; as the price increases, the quantity demanded contracts. as the price decreases, the quantity demanded expands.

• Individual demand

• Market demand

• Change in price of the good itself (expansion/contraction)

What is a demand schedule? a table that illustrates the quantity a consume will demand of a product for a certain price.

What is willingness to pay? how much a consumer will pay for a quantity of a product (their likelihood to buy a good/service at a certain price)

What is private benefit? represents the private value or utility to the consumer, the more utility a product has, the higher the willingness to pay.

Impact of non-price changes on demand

; refers to any factor that can change demand other than the price of the product (which doesn’t change)

This includes:

• changes in income (Y)

• consumer tastes and preferences

• expected price change in the future

• changes in the price of substitute goods

• changes in the price of complementary goods

• changes in the population

At any given price, a non-price factor will lead to an increase or decrease in demand.

It is important to remember that when referring to the quanitity demanded of a product it is expansion and contraction whereas when referring to a shift in the demand curve (often with non-price factors) the words increase and decrease are used.