What is demand?
The want or willingness of consumers to buy a product. To be an effective demand, a consumer must have enough money to buy the product. As price rises, the quantity demanded by consumers contracts. As price falls, the quantity demanded by consumers extends. A demand curve slopes downwards.
Demand curves
The market demand curve for a particular good or service will display the demand of all the consumers of that commodity given a set of possible prices.
In general, the market demand curve for any good or service will be downward sloping, showing the relationship between quantity demanded and price, assuming that nothing else changes that will affect how much consumers demand.
An increase in the price of a product will normally cause demand to contract. However, this assumes that no other factor affecting consumer demand changes. Demand curves are drawn based on the assumption that nothing else changes other than price so only changes in the price of a product will cause a movement along a demand curve. This is called the ceteris paribus assumption, meaning ‘all other things remaining unchanged’.
Shifts in demand curves
However, what happens to the demand for particular goods and services when factors other than price do change? For example, will a fall in people’s income cause them to demand less of a product whatever its price? What effect will an advertising campaign for a product have on demand, regardless of the price of the product?
An increase in demand means that consumers now demand more of a product at each and every price than they did before. The market demand curve will shift out to the right.
A fall in demand
A fall in demand means that consumers now demand less of a product at each and every price than they did before. The market demand curve moves in towards the left.
Exercises
1. Define "demand"
2. Explain the difference between a "human want" for a product and an "effective demand" for a product.
3. Explain why market demand curves are downward sloping.
1) Demand is the want or willingness of consumers to buy a product.
ReplyDelete2) A human want is something we would like to have, but maybe we cant afford it or me don't want it that bad. An effective demand means that we are willing to buy it so we demand it.
3) Because the lower the price the more the demand. More people would demand an iPhone if it would cost 200$ than if it costs 1000$.
Very true.
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