Demand.

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Presentation transcript:

Demand

What is Demand? Demand refers to a relationship between price and the quantity of a good or service that consumers demand.

Law of Demand A microeconomic law that states that, all other factors being equal, as the price of a good/service increases, the quantities consumers demand for the good/service will decrease and vice versa.

Demand Explained A higher price for a good leads to a smaller quantity demanded. Demand is illustrated as a downward-sloping curve on a graph with quantity on the x axis and price on the y axis.

Quantity Demanded quantity demanded is a specific amount that is demanded at a particular price.

Change in Demand A change in demand means that at every possible price, a different quantity will be demanded.

Change in Demand What is a substitute good? Competing products that can be used in place of one another; they’re related in such a way that an increase in the price of one increases the demand for the other Examples: beef and chicken; butter and margarine

Change in Demand What is a complimentary good? Goods (or services) that are used together Examples: Cars and gasoline; computers and Internet service

Change in demand Demand for a good will increase if the good becomes more popular, but demand will decrease if the good becomes less popular.

Factors That Cause Changes in Market Demand 1 - Consumer income/wealth

Factors That Cause Changes in Market Demand 2 - Consumer tastes and preferences (due to advertising)

Factors That Cause Changes in Market Demand 3 - Change in the price of substitute goods 4 - Change in the price of complementary goods

5 - Change in expectations

6 - Change in number of consumers

Price Quantity $2 8 $4 6 $6 4 $8 2 $10