Demand is defined as the different quantities of goods and services that consumers are willing and able to purchase at various price levels.
Quantity demanded is a the amount of a good or service that is desired at a particular price level.
Below is a demand curve, quantity demanded is one point on the curve (i.e. A, B, or C) and Demand is the entire line with all of the points that make it up.
The law of demand states that the relationship between the price level and the quantity demanded of a good or service is inverse. As the price level rises, consumers are less willing or less able to purchase the same quantity, and, therefore, buy less. As the price level falls, consumers are more willing or more able to purchase a greater quantity, and, therefore, buy more.
Using the graph above, when the price rises from P1 to P2, the quantity demanded decreases from 9 units to 7 units. Also, when the price drops from P3 to P2, the quantity demanded increases from 3 units to 7 units.
💡The only thing that changes the quantity demanded is the price of the good or service.
Determinants are factors that can cause the entire demand curve to increase or decrease. When there is an increase in demand (see graph below), the demand curve will shift right. At every price level, there is an increase in the quantity demanded. When there is a decrease in demand (see graph below), the demand curve will shift left. At every price level, there is a decrease in quantity demanded.
There are several determinants of demand that cause the shift to the right (increase in demand) or the shift to the left (decrease in demand). We are going to use the acronym I-N-S-E-C-T as a way to remember all of the determinants.
💸 Unit 1: Basic Economic Concepts
1.2Opportunity Cost and the Production Possibilities Curve (PPC)
1.3Comparative Advantage and Trade
📈 Unit 2: Economic Indicators and the Business Cycle
2.1Circular Flow and GDP
2.6Real vs Nominal GDP
💲 Unit 3: National Income and Price Determination
3.5Equilibrium in Aggregate Demand-Aggregate Supply (AD-AS) Model
💰 Unit 4: Financial Sector
4.3Definition, Measurement, and Functions of Money
4.4Banking and the Expansion of the Money Supply
⚖️ Unit 5: Long-Run Consequences of Stabilization Policies
5.1Fiscal and Monetary Policy Actions in the Short-Run
5.3Money Growth and Inflation
5.4Deficits and the National Debt
🏗 Unit 6: Open Economy-International Trade and Finance
6.1Balance of Payments Accounts
6.4Effect of Changes in Policies & Economic Conditions on the Foreign Exchange Market
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