Definition Of Demand
An economic principle that describes a consumer's desire and willingness to pay a price for a specific good or service. Holding all other factors constant, the price of a good or service increases as its demand increases and vice versa.
Quantity demanded
The amount of good that a consumer is willing and able to buy at a given price over a given period of time.
Types Of Goods
Substitute goods: A pair of good which are considered by consumers to be alternatives to each other.
Complementary goods: A pair of good consumed together. As the price of one goes up, the demand for both goods will fall.
Normal Good: A good whose demand rises as people's income rises.
Inferior good: A good whhose demand falls as people's income rise.
Theory Of Demand/ Law Of Demand
''When the price of a good rises, the quantity demanded will fall. This relationship is called the law of demand''
Reasons Of This Law
There are 2 reasons for this law:1) People will feel poorer.They will not be able to afford to buy so much of the good with their money. The purchasing power of their income has fallen. This is known as income effect.
2) The good will now cost more than alternative or substitute goods and people will switch to these. Also known as subsitution effect of a price rise.
When the demand curve shifts upwards, it shows a rise in quantity demanded, while on the other hand, a shift to the left suggest a decrease in quantity demanded. Shifts for demand take place due to change in consumer tastes, advertising infiuence, prices of subsitutes and complementary goods, etc.
Demand and Price Relationship
Quantity demanded hs a invers relation with price. This has been proved with law if the price of any commodity increases then quantity demanded dimniesh and vice versa.
Ghraph of Demand:
DEMAND CURVE
At this figure it is shown that as the price decreases quantity demaned increases, when the price is $100 then the quantity demanded is for 5 units, but as the Price falls from 100 to 20 then quantity demanded increases from units 5 to 30. This is dowmward curve and convex to origin.
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