Mastering Demand and Supply

Study Notes

Demand and Its Determinants

Demand refers to the quantity of a good or service that consumers are willing and able to purchase at a given price level, during a certain period of time.
Determinants of demand include:
- Price of the good or service
- Income of the consumer
- Prices of related goods
- Consumer preferences
- Population and demographic changes

The Law of Demand

The Law of Demand states that, ceteris paribus (all other things being equal), as the price of a good or service increases, the quantity demanded decreases, and vice versa.
This means that there is an inverse relationship between the price of a good and the quantity demanded.

Movement along the Demand Curve vs Shift of the Demand Curve

Movement along the demand curve occurs when there is a change in the quantity demanded in response to a change in the price of the good or service, while keeping other factors constant.
Shift of the demand curve occurs when there is a change in the demand for a good or service due to a change in one of the determinants of demand, such as a change in consumer preferences or income.

Elasticity of Demand

Elasticity of demand measures the responsiveness of the quantity demanded of a good or service to changes in its price or other influential factors.
It is calculated as the percentage change in quantity demanded in response to a percentage change in price.
Elastic demand means that a small change in price will lead to a large change in quantity demanded, while inelastic demand means that a large change in price will lead to a small change in quantity demanded.

Description

Test your knowledge on the theory of demand and supply with this quiz. Learn about the meaning of demand, what determines it, the law of demand, and the difference between movement and shift on the demand curve. Also, measure and understand elasticity.