Demand

Demand can be defined as the w ant or willingness of consumers to purchase goods or services.

Effective Demand: When consumers have enough money to buy goods or services, they buy how many ever goods and services they want or require.

Quantity Demanded: Amount of goods and services consumers are willing and able to buy.

Individual Demand: The demand for only one consumer.

Market Demand: Total demand for a product from all its consumers willing and able to buy.

Extension in Demand: As the price of the product falls, the quantity demanded rises.

Contraction in Demand: As the price for a product rises, the quantity demanded falls.

• Movement up the curve.

• Quantity demanded is less.

• Only happens when price changes.

Market Demand Curve: Relationship between price and total quantity demanded by consumers each period.

Increase in Demand: Consumers now demand more of a product at every price than they did before.

Decrease in Demand: Consumers now demand less amount of a product at every price than they did before.

Reasons for increase in Market Demand:

• Decrease in taxes

• Rise in population

• Rise in the price of substitutes

• Fall in the price of complements

• Increase in the advertisement of that product

• Rising interest rates on savings

Reasons for decrease in Market Demand:

• Increase in taxes

• Fall in population

• Fall in the price of substitutes

• Rise in the price of complements

• Banning of the advertisement of that product

• Changes in law

• Rising interest rates on borrowing

Normal Goods: those goods for which the demand tends to increase as income rises. Inferior Goods: those goods for which the demand tends to decrease as income rises.

Disposable income: The amount that people have left to spend or save after any taxes on their income have been deducted.

Complementary goods are said to be in joint demand. If the price of a complementary good rises, the price of the original good increases.

Substitute goods: a product which when it is purchased can replace the want of another good or service.

If a particular good has many substitutes, the chances of its demand varying are more likely compared to other goods and services.