DEMAND INFLUENCES
Many factors will influence the demand for a product. We usually look at each influence in isolation of others, ie ceteris parabus: all other things held constant
Law of Demand: a change in the
price of a product will cause the quantity demanded
of that product to change in the opposite direction, ie an inverse
relationship exists between P and Qd
Effective demand: how much people are prepared to buy at
any one particular price
in any time period
Demand curve: a graphical presentation of the law of demand.
As prices rise, quantity demanded falls, and vice versa
A movement along the demand curve is called a change in quantity demanded and is caused solely by a change in price.
Any non price change will cause the demand curve to move.
An outward shift of the demand curve is called an increase in
demand, meaning that at all prices more is being demanded.
An inward shift is called a decrease in demand, suggesting that at all
prices less is being bought.
Non price influences include:
Income: normal and inferior goods
Price of other goods: complementary and substitute goods
Market size
Advertising
Population size and structure
Expectations
Seasonality
Giffen goods
Snob goods