Demand Demand.

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Presentation transcript:

Demand Demand

Demand Is the quantity of a good or service which consumers are willing; and able to buy at a particular price in a certain period of time.

Individual and Market Demand:

Demand The relationship between demand and price Price Demand  the income effect – not able the substitution effect – not willing The demand curve

Market demand for potatoes (monthly) Point Price (pence per kg) 20 Market demand (tonnes 000s) 700 A Price (pence per kg) A Demand Quantity (tonnes: 000s)

Market demand for potatoes (monthly) Point Price (pence per kg) 20 40 Market demand (tonnes 000s) 700 500 A B Price (pence per kg) B A Demand Quantity (tonnes: 000s)

Market demand for potatoes (monthly) Point Price (pence per kg) 20 40 60 Market demand (tonnes 000s) 700 500 350 A B C C Price (pence per kg) B A Demand Quantity (tonnes: 000s)

Market demand for potatoes (monthly) Point Price (pence per kg) 20 40 60 80 Market demand (tonnes 000s) 700 500 350 200 A B C D D C Price (pence per kg) B A Demand Quantity (tonnes: 000s)

Market demand for potatoes (monthly) Point Price (pence per kg) 20 40 60 80 100 Market demand (tonnes 000s) 700 500 350 200 100 A B C D E D C Price (pence per kg) B A Demand Quantity (tonnes: 000s)

Note shape of curve - page 37 Demand Exceptions to the Law of Demand prestige goods quality assumption expectations of future price rises Giffen goods Note shape of curve - page 37

Demand Law of Demand assumes Ceteris Paribus What does ceteris paribus mean? “other things remain the same” factors other than price don’t change.

Demand Other determinants of demand Tastes (likes) price of substitute goods price of complementary goods income number of consumers (population/age) Expectations of price changes Movements along – contraction and extension Shifts in the demand curve

Market demand for potatoes (monthly) Point Price (pence per kg) 20 40 60 80 100 Market demand (tonnes 000s) 700 500 350 200 100 A B C D E D C Price (pence per kg) B A Demand Quantity (tonnes: 000s)

Change in demand condition An increase in demand Demand D1 Change in demand condition P Price D0 O Q0 Q1 Quantity

What else could shift demand? Weather? Availability of credit? Media report? Careless comment? Swine flu? Terrorism? Recession? "Most of the egg production in this country, sadly, is now affected with salmonella," she told reporters

Derived Demand Pear Cider Derived demand is when the demand from one good arises from the demand for another good: Pear Cider