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Demand

Demand. Consumers’ Wants Or The Study of Gimme, Gimme, Gimme. Components of Demand. Law of Demand Demand Quantity Demanded Price Determinants of Demand. Law of Demand. All things held constant, if P increases, QD will decrease ‘Ceteris Paribus’ Why, in economics terms, is this so?.

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Demand

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  1. Demand Consumers’ Wants Or The Study of Gimme, Gimme, Gimme

  2. Components of Demand • Law of Demand • Demand • Quantity Demanded • Price • Determinants of Demand

  3. Law of Demand • All things held constant, if P increases, QD will decrease • ‘Ceteris Paribus’ • Why, in economics terms, is this so?

  4. Demand • Not measured in specific numbers • An overall indication of the desire and ability to purchase a given good or service • Expressed as a line on a graph • Does not change due to price or quantity of the good or service

  5. Quantity Demanded (Qd) • A specific number of goods or services demanded at a specific price • Change when price changes; inverse relationship between the two • Moves along the Demand Curve

  6. Price • Specific price, marked along Y axis • Change in P force changes in Qd • Intersection of P & Q creates Qd

  7. Rules to Remember • A change in P or Q only will always and only result in a change in Qd • This is called a ‘shift on (or along) the Demand Curve’ • Ceteris Paribus, a change in Qd means that either P or Q have changed • Thus far, the curve itself has not moved

  8. Determinants of Demand • Factors other than changes in P or Q • Consumer Taste • Price of substitute goods • # of consumers in the market • Price of complementary goods • Overall income among consumers • Expectations of future price • Expectations of future income

  9. Determinants of Demand • These, and only these, cause shifts of the Demand Curve • When only the curve shifts, Qd will change • Curve will shift left or right

  10. More Rules to Remember • When changing variables on a Demand Curve, only change one at a time • Get in the habit of shifting the entire curve left or right, not up or down • Determinants of Demand go outside Ceteris Paribus, thus causing a shift of the entire curve

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