Chapter 3 and 4 Demand and Shifts in Demand

Demand refers to the willingness and ability of consumers to buy goods and services at given
prices over a given period.

Law of Demand: Ceteris Paribus (If other things remain constant)

Price ↓ Quantity Demanded ↑
Price ↑ Quantity Demanded ↓
Therefore, Price and Quantity Demand have an Inverse Relationship.

Movement along the demand curve

- Occurs due to changes in price only

Shifts of the demand curve

-Occurs due to changes in any factor other than price.

Factors that may shift the demand curve

1. Advertising
- A successful advertising can influence people to buy more at any given price. As a result, it increases the demand and
shifts the demand curve to right.

2. Income
- Increase in income will lead people to have more money in their hand and eventually people tend to spend more when
income rises. As a result, demand increases and shifts demand curve to the right.

3. Taste and Fashion

- In a fast-paced world, taste, and fashion changes now and then. As a result, trendy goods and services are demanded
more and other goods and services that cannot cope with the trends falls out.

4. Demographic Changes.
Size and age distribution of the population
- Increase in population size. e.g., Immigration
- Age Distribution - ageing/younger population
- Geographical distribution: Demand for goods will be higher than in rural areas.
- Ethnic Groups: If ethnic group grows, then there will be increase in demand for goods and services associated with
their culture.

Course Instructor Contact No#

Syed Abdullah Nabil 0167 6038 323
MS in ECONOMICS (NSU) Ace Academy
BBA in FINANCE (NSU) House#21, Dhanmondi-9/A
5.Price of substitutes goods

6.Price of complementary goods

Chapter Glossary

Demand refers to the willingness and ability of a consumer to purchase a product or service.

Effective demand is demand that is backed by the ability and willingness to pay for a product or service. In other words,
effective demand is demand those results in actual purchases or sales.

Demand Curve line drawn on a graph that shows how much of a good will be bought at different prices.

Demand Schedule is the table of quantity demanded of a good at different price level.

Shift in the demand curve shows the movement to the left or right of the entire demand curve when there is a change
in any factor affecting demand except the price.

Disposable income is the amount of money that an individual has available for spending and saving after all mandatory
deductions, such as taxes and social security contributions. Disposable income is an important indicator of a person's
standard of living and their ability to consume and save.

Inferior Goods are goods whose demand will fall with rise in income and rise if income falls. E.g., Ac and non ac bus.

Normal Goods are goods for which demand rises as rises and falls if income falls. E.g., iPhone.

Substitute goods are products or services that can be used in place of one another. E.g., Tea and coffee.

Complementary goods are products or services that are used together. E.g., ink and printer.

Course Instructor Contact No#

Syed Abdullah Nabil 0167 6038 323
MS in ECONOMICS (NSU) Ace Academy
BBA in FINANCE (NSU) House#21, Dhanmondi-9/A