Economics - Demand

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What is Demand?

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A want that is backed up by the ability to pay, it is the quantity of a good or service an individual is willing and able to buy at various prices.

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What is The Law of Demand?

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As the price of a good or service decreases, the quantity demanded will increase, as it is now more affordable and the consumer is more willing and able to consume at the lower price, ceteris paribus, vice versa.

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What is Ceteris Paribus?

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All other factors held constant.

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What can cause a Shift in Demand?

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Tastes & Preferences, Income (Disposable), Complement Goods (Price of), and Substitute Goods (Price of)

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What is a Complement Good?

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Products that go or are used together, e.g., Cars and Petrol. A price increase in one causes demand for the other product to decrease, and vice versa.

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What is a Substitute Good?

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Products that can be used in place of something else, e.g., Butter and Margarine or Beef and Lamb. A price increase for one product causes the Demand for the other product to increase, and vice versa.

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What is a Disposable Income?

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Income after direct tax (Income Tax) is paid or transfer payments (e.g., Student Loan) are received. When tax rates are cut, or transfer payments are increased, disposable income will increase.

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What are Tastes and Preferences?

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What consumers like, enjoy, or would prefer to consume based on their viewpoints, values, interactions, and advertising.

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The Law of Demand states that as the price of a good or service increases, the quantity demanded will ________ vice versa, ceteris paribus.

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decrease

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The Law of Demand states that as the price of a good or service decreases, the quantity demanded will ________ vice versa, ceteris paribus.

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increase