Demand

Demand is how much consumers want and are able to buy an amount of a good or service at a
given price.
Original
“Demand means the willingness and ability to purchase a quantity of a good or service at a
certain price over a period of time”

Law Of Demand
The law of demand states that if there is an increase in price
Original
“The law of demand states that within a period of time, an increase in price would lead to a
decrease in quantity demanded,ceteris paribus.”

Why are demand curves downward sloping?

Price and quantity demanded are inversely proportional in demand curves because of the 2
following effects:
Substitution effect: There is a downward pressure on the price as quantity demanded increases
because when the relative price of good X becomes higher than that of good Y, consumers will
choose good Y instead and the quantity demanded of good X lowers.
Income effect: There is a downward pressure on price as quantity demanded increases
because when consumers buy good X at a certain quantity, they would have less disposable
income to spend on more of the same good.
Original
“The substitution effect: when the price of good X increases, other goods are relatively cheaper,
Consumers will substitute other goods for good X, thus lowering the quantity of good X bought.
The income effect: when the price of good X increases, consumers' real income is lowered so
the quantity of good X they can afford is lowered.”
Price determinant of demand (movement)
When the price of good X increases, the quantity demanded of good X will also decrease, vice
versa.
Original: “When there is a change in the price of good A, the quantity demanded of good A will
change. This results in a movement along the same demand curve.
Non-price determinant of demand (shift)
When the quantity of good X produced at every price point changes by the same amount, it is a
non-price determinant of demand.
Original: “the shift of the demand curve means the quantity demanded changes at every price
level. Hence, factors resulting in a shift of the demand curve shall be non-price factors of the
good.
1. Change in income
Normal goods: when there is an increase in income, consumers would want to purchase more,
thus the demand curve moves to the right.
Inferior goods: when there is an increase in come, consumers would seek to replace the inferior
goods with normal goods, and thus the demand curve would move to the left.
 2. Price of substitutes
Two or more goods can be classified as a substitute for each other if they fulfill the same need,
such as mcdonalds and burger king both supplying for the demand of burgers. If Mcdonalds
lowers their price, more of the demand for burgers would move to mcdonalds and as a result
burger kings demand would move to the left.
3. Price of complements
Two or more goods can be classified as a complement for each other when
4. Preferences
5. Demographic factors
6. Expectation/Speculation