1.2.1 demand

• what is demand?

  demand is the amount of a good that consumers are willing and able to buy at a given price
• the amount of a good demanded depends on:

  • the price of the good
  • the income of consumers
  • the demand for alternative goods which could be used (substitutes)
  • the demand for goods used at the same time
  • whether the consumer likes the good
• complementary goods:

  • complementary
  • demand for one type of good will affect demand for another purchases are linked: petrol and cars, games console and their games
• substitute goods (a good that fulfils the same customer needs)

  • the impact of a change in price will cause customers to switch products to an alternative good
• changes in consumer incomes:

  as consumer's income rise, then the pattern of demand changes
• fashion, tastes and preferences:

  as trends changes, demand for products is impacted
• advertising and branding:

  • demand is likely to increase if product is heavily advertised
  • branding is also used to influence demand
  • heavy branding helps to increase demand?
• demographics

  as population grows - demand for nearly all goods is likely to increase
• external shocks:

  • outbreak of war - tanks, guns
  • changes in unemployment - inferior goods (demands increases income falls)
  • house price change - mortgages/ home improvement loans, interest rates - cost of living
  • tax rates - imports and exports
• seasonality - seasonal demand

  what products experience increase in demand in different seasons?
• the demand curve

  when price goes up - the quantity demand goes down

  when price goes down - quantity demand goes up

  • price and demand have an inverse relationship

  the demand curve slopes downward from left to right, this reflects the INVERSE relationship between price and quantity demand
• shift in demand:

  if price remains unchanged but demand increases due to non price factors, the entire demand curve shifts to the right

  if the price remains unchanged but demand increases due to non price factors, the entire curve shifts to the left.