2.2 - Demand

• Demand refers to the quantity of a product or service that consumers are willing and able to buy at a given price at a specific time.
• This is an example of a demand curve because it is downward sloping

  
• Movements along a demand curve can only occur as a result of a change in price.
• Shifts along a demand curve are caused by:

  • Consumer income (income increases --> increased demand)
  • Taste/Preference (product trending --> increased demand)
  • Substitute (decreased substitute demand --> increased demand)
  • Complements (increased complement demand --> increased demand)
  • Population (increased population --> increased demand)
• A shift right benefits consumers since they are likely to see an increase in revenue as a result of increased demand.
• A shift right doesn't benefit consumers as they are likely to see a rise in prices due to increased demand.
• Price elasticity of demand (PED) refers to the responsiveness of quantity demanded to a change in price.
• If PED > -1 then it is price elastic

  If PED < -1 then it is price inelastic
• Formula for PED = (% change in quantity demanded/ % change in price)
• PED is important for producers because:

  • It can inform pricing decisions
  • It can inform stock decisions