Demand

1. Demand Consumers’ Wants Or The Study of Gimme, Gimme, Gimme

2. Components of Demand • Law of Demand • Demand • Quantity Demanded • Price • Determinants of Demand

3. Law of Demand • All things held constant, if P increases, QD will decrease • ‘Ceteris Paribus’ • Why, in economics terms, is this so?

4. Demand • Not measured in specific numbers • An overall indication of the desire and ability to purchase a given good or service • Expressed as a line on a graph • Does not change due to price or quantity of the good or service

5. Quantity Demanded (Qd) • A specific number of goods or services demanded at a specific price • Change when price changes; inverse relationship between the two • Moves along the Demand Curve

6. Price • Specific price, marked along Y axis • Change in P force changes in Qd • Intersection of P & Q creates Qd

7. Rules to Remember • A change in P or Q only will always and only result in a change in Qd • This is called a ‘shift on (or along) the Demand Curve’ • Ceteris Paribus, a change in Qd means that either P or Q have changed • Thus far, the curve itself has not moved

8. Determinants of Demand • Factors other than changes in P or Q • Consumer Taste • Price of substitute goods • # of consumers in the market • Price of complementary goods • Overall income among consumers • Expectations of future price • Expectations of future income

9. Determinants of Demand • These, and only these, cause shifts of the Demand Curve • When only the curve shifts, Qd will change • Curve will shift left or right

10. More Rules to Remember • When changing variables on a Demand Curve, only change one at a time • Get in the habit of shifting the entire curve left or right, not up or down • Determinants of Demand go outside Ceteris Paribus, thus causing a shift of the entire curve