Cristine Joyce B.

Malubay July 29, 2015

BSA 1-3

Assignment #3

1. What is Demand?
 In economics, demand is the utility for a good or service of an economic agent,
relative to his/her income. Demand is a buyer's willingness and ability to pay a
price for a specific quantity of a good or service. Demand refers to how much
(quantity) of a product or service is desired by buyers at various prices. The
quantity demanded is the amount of a product people are willing or able to buy at
a certain price; the relationship between price and quantity demanded is known
as the demand.

2. What is Demand Schedule?

 In economics, the demand schedule is a table of the
quantity demanded of a good at different price levels.
Thus, given the price level, it is easy to determine the
expected quantity demanded. This demand schedule can
be graphed as a continuous demand curve on a chart
having the Y-axis representing price and the X-axis
representing quantity.

3. What is Demand curve?

 In economics, the demand curve is the graph depicting
the relationship between the price of a certain
commodity and the amount of it that consumers are
willing and able to purchase at that given price. It is a
graphic representation of a demand schedule.
 4. Law of Demand
 The law of demand states that other factors being constant (cetris peribus),
price and quantity demand of any good and service are inversely related to
each other. When the price of a product increases, the demand for the same
product will fall.
 In economics, the law of demand states that, all else being equal, as the price
of a product increases (↑), quantity demanded falls (↓); likewise, as the price of a
product decreases (↓), quantity demanded increases (↑). In simple words, law of
demand means inverse relationship between price and quantity of demand.
There is a negative relationship between the quantity demanded of a good and
its price. The factors held constant in this relationship are the prices of other
goods and the consumer's income.

5. Factors Influence the Quantity of Demand

 Innumerable factors and circumstances could affect a buyer's willingness or
ability to buy a good. Some of the more common factors are:
 Good's own price: The basic demand relationship is between potential prices of
a good and the quantities that would be purchased at those prices. Generally the
relationship is negative meaning that an increase in price will induce a decrease
in the quantity demanded. This negative relationship is embodied in the
downward slope of the consumer demand curve. The assumption of a negative
relationship is reasonable and intuitive. If the price of a new novel is high, a
person might decide to borrow the book from the public library rather than buy it.
 Price of related goods: The principal related goods are complements and
substitutes. A complement is a good that is used with the primary good.
Examples include hotdogs and mustard, beer and pretzels, automobiles and
gasoline.(Perfect complements behave as a single good.) If the price of the
complement goes up the quantity demanded of the other good goes down.
Mathematically, the variable representing the price of the complementary good
would have a negative coefficient in the demand function. For example, Q d = a -
P - Pg where Q is the quantity of automobiles demanded, P is the price of
 automobiles and Pg is the price of gasoline. The other main category of related
goods is substitutes. Substitutes are goods that can be used in place of the
primary good. The mathematical relationship between the price of the substitute
and the demand for the good in question is positive. If the price of the substitute
goes down the demand for the good in question goes down.
 Personal Disposable Income: In most cases, the more disposable income
(income after tax and receipt of benefits) a person has the more likely that person
is to buy.
 Tastes or preferences: The greater the desire to own a good the more likely
one is to buy the good. There is a basic distinction between desire and demand.
Desire is a measure of the willingness to buy a good based on its intrinsic
qualities. Demand is the willingness and ability to put one's desires into effect. It
is assumed that tastes and preferences are relatively constant.
 Consumer expectations about future prices, income and availability: If a
consumer believes that the price of the good will be higher in the future, he/she is
more likely to purchase the good now. If the consumer expects that his/her
income will be higher in the future, the consumer may buy the good now.
Availability (supply side) as well as predicted or expected availability also affects
both price and demand.
 Population: If the population grows this means that demand will also increase.
 Nature of the good: If the good is a basic commodity, it will lead to a higher
demand
 This list is not exhaustive. All facts and circumstances that a buyer finds relevant
to his willingness or ability to buy goods can affect demand. For example, a
person caught in an unexpected storm is more likely to buy an umbrella than if
the weather were bright and sunny.