Economics : Demand

Demand: the quantity of a good or service that consumers are willing and able to purchase at various price levels at a given point in time.

Individual demand: demand of individual consumers

Market demand: demand by all consumers for a g or s.

* Market demand obtained by summing quantities demanded by all individual consumers at various price levels.

Factors effecting market demand:

* the price of the good or service itself: the consumer must decide whether or not willing to pay nominated price. Necessaties are goods purchased regardless of price, but reduce demand for luxury items if price rises.

* the price of other goods and services: consumers consider some goods as close substitutes, e.g margarine and butter. If price of margarine increases, demand for its substitute butter increases. Also some goods considered compliments, e.g car and petrol. If decline in demand for cars = ↓ in demand for petrol.

The illustration that accompanied Marshall's origi...

Perfectly inelastic demand

Perfectly elastic demand

* Expected future prices: if price expected to increase in future they would bring forward consumption and increase the current demand for the product.

* Changes in consumer tastes and preferences: e.g clothing. Clothing coming into fashion ↑ demand, clothing going out of fashion ↓ demand.

The level of income: as income level ↑ ability and wiliness to purchase ↑. Increase in income usually results in more increase in demand for luxury goods than necessities. Change in income distribution would also change level of d. e.g distributing income to higher earners lead to increase in demand for luxury items. Consumer expectations about future income levels and prospects influence decision to buy certain types of goods. E.g less likely to purchase luxury items if economic outlook is bleek.

* The size of the population and its age distribution: size effects total quanitity of goods demanded, age determines type of...