Law of demand
When the price goes up, the quantity demanded goes down;when the price goes down, the quantity demanded goes up.
Tools used to summarize the relationship between demand and price
1.Demand curve--a graph
(**Notice that it is not like the graph we use in math, in here, the independent variable is y and the dependent variable is x)
2.Demand schedule--a table
Distinguish between demand and quality demand
3.
The ceteris paribus assumptionA demand curve or a supply curve is a relationship between two, and only two, variables: quantity on the horizontal axis and price on the vertical axis. The assumption behind a demand curve or a supply curve is that no relevant economic factors, other than the product’s price, are changing. Economists call this assumption ceteris paribus, a Latin phrase meaning “other things being equal”.
Demand--Refers to the entire demand schedule, the entire curve, which shows the amount of some good or service consumers are willing and able to purchase
Quantity demand--Refers to a specific point on the curve, a particular price or demand quantity, which is the total number of unit purchased at that price.
Price of related products and demand
1.Substitude
e.g. When A company's cell phone products' prices rise, the demand for them would go down;at the same time, if B company's cell phone products' prices do not go up, the demand for them would rise.
2.Completement
e.g. When the price of gasoline goes up, the demand for it would go down, and at the same time, the demand for cars will also fall.
Change expected future prices and demand
When a product's price is going to rise, the demand for it now would increase, for people all want to buy it when its price is still low;vice versa.
Change in income, population or preference
1.
IncomeFor normal goods, when the income goes up,the demand for that product is likely to rise. For example, when people's income goes up, they're likely to buy,let's say, the macbook they've been looking for several months, so the demand for this product rises.
For inferior goods, when the income goes up, the demand for that product is likely to fall. For example, when people have more money, they're more likely to buy a house instead of renting it, so the demand for renting houses would go down.
2.
Population
When the population rises, the demand for certain kinds of products is likely to rise. For example, the proportion of elderly citizens in the United States population is rising. It rose from 9.8% in 1970 to 12.6% in 2000. When there are more elderly people in the society, the demand for medical facilities is likely to increase.
3.
preference and taste
When people's preferences on certain goods rise, the demand for those goods is likely to increase; vise versa.
SummarySix factors that can shift demand curves--income, price of substitutes, price of complements, taste and preference, population likely to buy the item, future expeditions.
Distinguish between demand and quality demand
3.The ceteris paribus assumptionA demand curve or a supply curve is a relationship between two, and only two, variables: quantity on the horizontal axis and price on the vertical axis. The assumption behind a demand curve or a supply curve is that no relevant economic factors, other than the product’s price, are changing. Economists call this assumption ceteris paribus, a Latin phrase meaning “other things being equal”.
Demand--Refers to the entire demand schedule, the entire curve, which shows the amount of some good or service consumers are willing and able to purchase
Quantity demand--Refers to a specific point on the curve, a particular price or demand quantity, which is the total number of unit purchased at that price.
Price of related products and demand
1.Substitude
e.g. When A company's cell phone products' prices rise, the demand for them would go down;at the same time, if B company's cell phone products' prices do not go up, the demand for them would rise.
2.Completement
e.g. When the price of gasoline goes up, the demand for it would go down, and at the same time, the demand for cars will also fall.
Change expected future prices and demand
When a product's price is going to rise, the demand for it now would increase, for people all want to buy it when its price is still low;vice versa.
Change in income, population or preference
1.IncomeFor normal goods, when the income goes up,the demand for that product is likely to rise. For example, when people's income goes up, they're likely to buy,let's say, the macbook they've been looking for several months, so the demand for this product rises.
For inferior goods, when the income goes up, the demand for that product is likely to fall. For example, when people have more money, they're more likely to buy a house instead of renting it, so the demand for renting houses would go down.
2.Population
When the population rises, the demand for certain kinds of products is likely to rise. For example, the proportion of elderly citizens in the United States population is rising. It rose from 9.8% in 1970 to 12.6% in 2000. When there are more elderly people in the society, the demand for medical facilities is likely to increase.
3.preference and taste
When people's preferences on certain goods rise, the demand for those goods is likely to increase; vise versa.
SummarySix factors that can shift demand curves--income, price of substitutes, price of complements, taste and preference, population likely to buy the item, future expeditions.
