What is demand
Quantity that purchasers are willing and able to buy at a given price in a given period of time
Why is the demand curve downward sloping
Income effect - a fall in price increases the real purchasing power of consumers which allows people to buy more with a given budget
Substitution effect - a fall in price of goods x makes it relatively cheaper compared to substitutes so some consumers will switch to good x leading to higher demand
Due to diminishing marginal utility - consumer surplus generally declines with extra units consumed- because extra unit generates less utility than the one already consumed . Therefore consumers are willing to pay less for extra units
What is a market , and what is market demand
A market is created when buyers and sellers interact . Market demand is total demand for a good or service found by adding together all individual demands
What are the types of demand
Derived demand - demand for one good is linked to demand for a related good
Composite demand - good demanded has more than one use
Joint demand - demand for goods that are bought together
Competitive demand - demand for goods which are substitutable so the sale of the goods is in competition with the substitute
7 Factors influencing demand
Price of the good - movement
Income - higher income higher disposable income- demand for normal goods increase
Change in price of substitute or complementary goods
Consumer taste and preferences - fashion trends
Expectations of future prices - if consumers expect prise to rise they bring purchases forward
Government policy - indirect taxes - higher prices - contraction in demand - lower market demand - critice saying depend on ped
Changes in population size or age - higher population means higher total demand
What is a normal good
One where quantity demand increases in respond to an increase in consumer income
What is an inferior good
One where the quantity demanded decreases in response to an increase in consumer incomes
What is consumer surplus
Value that consumers gain from consuming a good or service over and above the price paid
Factors affecting consumer surplus
Market price - if price of good falls - larger gap between willingness to pay and actual price - consumer surplus rise
PED - if good is inelastic. - consumers are willing to pay much more than the market price - consumer surplus is higher
