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Demand

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Submitted By henakoch
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Chapter 2 Demand
What is Demand?
If you demand something, then you 1. Want it 2. Can afford it, and 3. Have made a definite plan to buy it.
The quantity demanded of a good or service is the amount that consumers lan to buy during a particular time period, and at a particular price.
Law of Demand * Other things remaining the same, the higher the price of a good, the smaller is the quantity demanded * The lower the price of a good, the larger is the quantity demanded. * The law of demand results from, * Substitution effect * Income effect
- Substitution effect : When the relative price of a good or service rises, people seek substitution for it, so the quantity demanded of the good or service decreases.
- Income effect : When the price of a good or service rises relative to income, people cannot afford all the things they previously bought, so the quantity demanded of the good or service decreses.

Change in Demand
When some influence on buying plans other than the price of the good changes, there is a change in demand for that good.
When demand increases/deceases, the demand curve shifts rightward/leftward.

Six main factors that change demand 1. The price of related goods consumed
- A substitute is a good that can be used in place of another good.
- A complement is a good that is used in conjunction with another good.
Eg. The demand for energy bars increases when,
The price of substitute for an energy bar rises, or the price of a complement of an energy bar falls. 2. Expected future prices
- If the price of a good is expected to rise in the future, current demand for the good increases and the demand curve shifts rightward. 3. Income
- When income increases, consumers buy more of most goods and the demand curve shifts righward.
- A normal good is one for which demand increases as income...

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