Demand and Supply

• demand


  Someone’s willingness and desire to pay for a good or service at that price
• Effective demand


  Someone’s willingness and desire to pay for a good or service at that price, backed up by the ability.
• What is the law of demand


  As long as other factors remain constant (ceteris paribus) there is an inverse relationship between price of a good and the quantity demanded
• Change in price does not mean a change in demand, just the quantity that is demanded
• notional (latent) demand

  When there is willingness to purchase a good or service, but they lack the purchasing power to be able to afford it
• What could change demand?

  weather

  Advertisement/trends

  Disposable income
• normal goods


  As earnings increase, demand increases. eg: diamonds
• Inferior goods

  As earnings increase the demand decreases. eg: cheap jewellery