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Questions and Answers
What is the law of demand?
What is the law of demand?
The law of demand states that there is an inverse relationship between quantity demanded and the price of good and service. If the price goes down, the quantity demanded will increase.
What is market demand?
What is market demand?
Market demand is the sum of all individual demands for a good.
What would happen if the price for the product decreases?
What would happen if the price for the product decreases?
If the price of the product decreases, the quantity demanded will increase.
What is demand?
What is demand?
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What happens to demand as the price of cars increases?
What happens to demand as the price of cars increases?
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Study Notes
Law of Demand
- States an inverse relationship between price and quantity demanded
- If the price of a good goes down, quantity demanded will increase
- Shows consumer's various quantities of a good (or service) at different possible prices during a period of time
- Market demand is the sum of individual demands for a good
Factors Affecting Demand
- Income
- Prices of other goods
- Flight/Train tickets
- Advertising
- Fashion
- Weather
- Demographics (such as more expensive U.K. holidays)
- Expectations of future price changes
- Changes in size/structure of population
- Changes in tastes, preferences, fashions
Effects of Price Decreases
- At higher prices, consumers generally unwilling to purchase
- At lower prices, more of a good or service.
Effects of Price Increases
- At P1 (initial point) the quantity of cars is much higher.
- However, at point P2 (due to moving along the curve) prices increase.
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