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Demand
- Amount of good or service that consumers are able and willing to buy at various prices.
- (How much are you willing to buy at a specific price?)
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Supply
Amount of a good or service that a producer or supplier is willing to sell at various prices
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The Law of Demand
Quantity demanded and price move in opposite directions. (Price goes up, demand goes down. Price goes down, demand goes up)
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Real income effect
(Determines of Demand)
Consumers buy less if product prices rise and real income stays the same
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Substitution effect
(Determines of Demand)
Consumers will buy a lesser priced product if satisfaction level remains the same
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Diminishing Marginal Utility
The reduction in the ability of a good or service to satisfy consumer wants
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Changes in Population
(Major causes of change in demand)
- Available market increase or decrease with population shifts
- Ex: Housing, hospital, schools
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Changes in Income
(Major causes of change in demand)
- Prices will go up as income goes up. Down if income goes down.
- Ex: Holiday shopping in 2008
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Changes in taste and preferences
(Major causes of change in demand)
- Fads, new income
- Ex: Hannah Montana, Starbucks, Air Jordan, I phone
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Substitutes
(Major causes of change in demand)
Consumers will buy substitutes if prices of desired products get too high
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Complementary goods
(Major causes of change in demand)
- Good that sell together ( co dependent). If one price goes down, the other's move with it.
- Ex: Toys and batteries, milk and cereal
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