KEYWORD Definition

is the desire to possess a commodity or make use of a service, combined with the
Demand
Quantity demanded (Qd)
LAW OF DEMAND
LAW OF DEMAND FORMULA
Qd
a maximum demand (at zero prices or no influence of price)
b (demand elasticity)
P
(-)
price and quantity combination (for
demand)
a formula
b formula
P formula
Direction of the demand curve
Movement along the curve (demand)
Shifting of the curve (demand)
DETERMINANTS OF DEMAND
NON PRICE DETERMINANTS (demand)
[NPDs]
normal goods
inferior goods
DEMAND NPD: INCOME
DEMAND NPD: No. OF BUYERS
DEMAND NPD: COMPLEMENTARY
GOODS
DEMAND NPD: EXPECTATIONS
DEMAND NPD: SUBSTITUTE GOODS
DEMAND NPD: TASTES AND
PREFERENCES
DEMAND NPD: SEASONALITY
ability to purchase it and its negative relationship to its price.
is the number of commodities a person is willing and is able to purchase given a
certain price level at a given point in time.
states that as prices go up, the quantity demanded goes down and vice-
versa. (resulting in a downward sloping curve)
Qd = a – bP
quantity demanded
slope; sometimes referred to as the elasticity of demand
demand price; a price level desired by the consumers at which they are willing
and be able to buy their desired commodity.
the mathematical manifestation of the law of demand
interpreted as: at the price of Px, the consumer is willing and able to buy Qd units
of the said good.
a = Qd + bP (my conversion - johans)
b = (a - Qd) / P (my conversion - johans)
P = (a - Qd) / b (my conversion - johans)
downward sloping curve
Change in quantity demanded is a condition brought about by the changes in
prices which are reflected graphically by the movements of reference points along
one demand curve.
Change in demand is a condition brought about by changes in the non-price
determinants (NPD) of demand which in effect will shift the demand curve either
to the left (decrease in demand) or to the right (increase in demand).
Enumeration: 1. Price 2. NPDs
ENUMERATION: 1. Income 2. No. of buyers 3. Complementary goods 4.
Expectations 5. Substitute goods 6. Tastes and Preferences 7. Seasonality
[acronym: INCESTS]
goods whose demand varies directly to income (direct = income increase,
demands for this good increases as well)
Conversely, a good that exhibits inverse variability with demand as money income
rises is called inferior goods. Examples are demand for used clothing, third hand
cars and re-assembled goods. (inverse = income increase, demands for this
good decrease)
An increase in the money income increases the purchasing capability of the
consumer, hence affects the demand for goods. For normal goods: (direct
relationship = income increase, demands for this good increases as well). For
inferior goods: (inverse relationship = income increase, demands for this good
decrease)
an increase in the number of buyers of a certain commodity will likewise increase
the demand for such (direct relationship = No. of buyers increase, demand
increase)
Prices of related goods. If the price of this good rises, the demand for the first
good declines. Both of the goods (first good and related good) are used together
to render the satisfaction as expected of them. (inverse relationship = price of
complimentary good increase, demand for first good decrease)
An anticipated event that would lead to higher consumption of the now than in the
future increases the demand today.(example: an expected price increase in the
future would increase the demand today.
If the price of this good rises, the demand for the original good rises as it becomes
cheaper compared to the price of the substitute good. (direct relationship = price
this good increase, demand for first good decrease)
favorable change in consumer tastes and preference over a certain product
increases the demand for that product. (e.g. more good is consumed) (direct
relationship = favor/preference for the good increase, demand for the good
increase)
Dates and time frame, may increase or decrease the demand for a good.