Demand

Definition

Demand is the quantity of a good or service that consumers are willing and able to purchase at various prices over a given period. It reflects consumers' preferences and purchasing power in the market.

5 Must Know Facts For Your Next Test

1. Demand curves typically slope downward, indicating that as price decreases, quantity demanded increases.
2. Factors influencing demand include consumer income, tastes and preferences, prices of related goods, expectations of future prices, and the number of buyers.
3. A shift in the demand curve occurs due to changes in non-price factors, while movement along the curve is caused by price changes.
4. The law of demand states that there is an inverse relationship between price and quantity demanded, ceteris paribus (all else being equal).
5. Elasticity of demand measures how much the quantity demanded responds to changes in price; it can be elastic, inelastic, or unitary.

Review Questions

• What causes a movement along the demand curve versus a shift in the demand curve?
• How do changes in consumer income affect the demand for normal and inferior goods?
• Explain the concept of elasticity of demand and why it is important for businesses.

Related terms

Supply: The quantity of a good or service that producers are willing and able to sell at various prices over a given period.

Market Equilibrium: The point where the quantity demanded equals the quantity supplied at a particular price.

Substitute Goods: Goods that can replace each other; when the price of one increases, demand for its substitute is likely to increase.