1
Q
Definition of demand
A
• The willingness and ability to buy a quantity of a good at a given price in a given time period
2
Q
Income effect
A
• When income rises, then consumers have more real income to spend (disposable income) so demand increases for NORMAL goods
3
Q
Normal good
A
As income increases, demand increases
4
Q
Inferior good
A
As income increase, demand decreases
5
Q
Substitution effect
A
When price falls, the good is more attractive compared to other goods
6
Q
Non price determinants of demand
A
Income Prices of other goods Tastes and preferences (advertising) Size of population Population demographic Changes in income distribution Government policy changes Seasonal changes
