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Demand

 

Our wants become a demand when we have the money to back up our desires. We call this effective demand, i.e., how much consumers will be prepared to buy at a particular price. 

Assuming ceteris paribus, as price increases demand will fall and as prices decreases demand will rise. This leads to a downward sloping demand curve. 

A change in price will lead to a movement along the demand curve. An increase in price will lead to demand contracting and a decrease in price will cause demand to expand

A number of factors will cause the demand curve to shift, either to the right (increase in demand) or left (decrease in demand):

        Income - when income rises demand for a normal good will also rise.

        The price of other goods - if the price of a substitute good falls then demand will fall (e.g., Coca-Cola and Pepsi). If the price of a complement good falls then demand will rise (e.g., computers and computer games).

        Population - an increase in population is likely to lead to an increase in demand.

        Changes in fashion - as goods go out of fashion demand for them will fall.

        Changes in legislation - e.g., demand for gun in the UK decreased after it became illegal to own one.

        Advertising - this aims to influence consumer choice.

The time of the year - e.g., demand for holidays in Spain will be lower in the winter and demand for gas will be higher during the winter.

 

Notes on the internet
Demand curve assignment
The Demand Curve
Written by Robert Schenk
The Demand Curve
The Demand Curve

 

 

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