Economics Demand Concepts

Definition: Demand refers to the quantity of a good or service that consumers are willing and able to purchase at various prices.
Law of Demand: As the price of a good decreases, the quantity demanded increases, and vice versa (inverse relationship).
Demand Curve:
- Typically slopes downward from left to right.
- Represents relationship between price and quantity demanded.
Factors Affecting Demand:
- Income: Higher incomes generally increase demand for normal goods; lower incomes may increase demand for inferior goods.
- Prices of Related Goods:
  - Substitutes: If the price of a substitute rises, demand for the original good increases.
  - Complements: If the price of a complement rises, demand for the original good decreases.
- Consumer Preferences: Changes in tastes and preferences can shift demand.
- Expectations: If consumers expect prices to rise, current demand may increase.
- Population: An increase in population typically increases overall demand.

Definition: Supply refers to the quantity of a good or service that producers are willing and able to sell at various prices.
Law of Supply: As the price of a good increases, the quantity supplied increases, and vice versa (direct relationship).
Supply Curve:
- Typically slopes upward from left to right.
- Represents relationship between price and quantity supplied.
Factors Affecting Supply:
- Production Costs: Higher costs decrease supply; lower costs increase supply.
- Technology: Advances in technology can increase supply by making production more efficient.
- Number of Suppliers: More suppliers typically increase market supply.
- Expectations: If suppliers expect prices to rise, they may withhold supply to sell later at higher prices.
- Government Policies: Taxes, subsidies, and regulations can affect supply levels.

Definition: The point where the quantity demanded equals the quantity supplied.
Equilibrium Price: The price at which market supply and demand balance each other.
Shifts in Demand and Supply:
- A shift in demand (right or left) causes a new equilibrium price and quantity.
- A shift in supply (right or left) causes a new equilibrium price and quantity.
Surplus and Shortage:
- Surplus: Occurs when supply exceeds demand at a given price, leading to downward pressure on prices.
- Shortage: Occurs when demand exceeds supply at a given price, leading to upward pressure on prices.

Demand is the quantity of a good or service consumers are willing and able to purchase at different prices.
The Law of Demand states that there is an inverse relationship between price and quantity demanded; as price decreases, quantity demanded increases.
The Demand Curve typically slopes downward, illustrating the inverse relationship between price and quantity demanded.
Factors Affecting Demand:
- Income: Increased income raises demand for normal goods, while lower income raises demand for inferior goods.
- Prices of Related Goods:
  - Substitutes: A price increase in a substitute leads to increased demand for the original good.
  - Complements: A price increase in a complement reduces demand for the original good.
- Consumer Preferences: Shifts in tastes and preferences can lead to changes in demand.
- Expectations: Anticipating price increases can result in higher current demand.
- Population: A growing population generally boosts overall demand.

Supply refers to the quantity of a good or service that producers are willing and able to sell at various price levels.
The Law of Supply indicates a direct relationship between price and quantity supplied; as price increases, quantity supplied increases.
The Supply Curve usually slopes upward, representing the direct relationship between price and quantity supplied.
Factors Affecting Supply:
- Production Costs: Increased production costs may reduce supply, while lower costs typically increase it.
- Technology: Technological advancements can enhance efficiency, increasing supply.
- Number of Suppliers: More suppliers in the market usually lead to a higher overall supply.
- Expectations: Suppliers may withhold supply if they expect future price increases, aiming for higher profits later.
- Government Policies: Taxes, subsidies, and regulatory measures significantly influence supply levels.

Market equilibrium is achieved when the quantity demanded equals the quantity supplied.
The Equilibrium Price is the price point where market supply and demand are balanced.
Shifts in Demand and Supply:
- A right or left shift in demand results in a new equilibrium price and quantity.
- A right or left shift in supply also causes a new equilibrium price and quantity.
Surplus and Shortage:
- A surplus occurs when supply surpasses demand, causing downward pressure on prices.
- A shortage arises when demand exceeds supply, leading to upward pressure on prices.