Demand

 The demand curves

Demand is the quantity of a good/service that consumers are willing and
able to buy at a given price, at a particular time.

Demand curves slope downwards, which means that the higher price
charged for a good, the lower the quantity demanded.
Since the consumes are rational, they want to maximise thir profit, hence
consumers aim to pay the lowest price possible for goods and services. As
prices decrease more consumers are willing and able to purchase a good
or service – lower price = higher demand.

The downward slope can also be explained through the:

 Income effect: assuming a fixed level of income, the income effect
means that as a price falls the amount that consumers can buy with
their income increases
 Substitution effect: a fall in price of a good makes it relatively
cheaper than other goods, so consumers will increase demand for
the cheaper good and reduce demand for the more expensive
good.

Demand shifts
A demand curve moves to the left, when there is a decrease in the
amount demanded at every price
A demand curve shifts to the right when there is an increase in the
amount demanded at every price

Factors influencing PED

1. Substitutes
2. Type of good
a. Essential
b. Habit forming
c. Cannot be postponed
3. Percentage of income spent on good
4. Time
a. In the long run, demand becomes more price elastic, as it
becomes easier to change to alternatives