Demand

• a market is where buyers and sellers exchange goods and services for money
• product market - market for finished goods

  international market - trade between countries

  national market - trade within countries

  regional market - e.g. uk housing market
• consumers want to maximise their economic welfare, they act rationally to maximise their utility
• firms aim to maximise profits, achieving the highest possible profit for the risk taker
• workers want to maximise their welfare and income
• governments want to maximise the welfare of its citizens
• firms and consumers are rational, this means they try to maximise their economic welfare
• demand - the amount of a good or service that consumers are willing and able to buy at a given price in a given time period
• effective demand is when a consumers' desire to buy a product is backed up by an ability to pay
• individual demand is when the market price reflects the value that consumers place on a product
• market demand is the some of individual demand for a product
• derived demand - the demand for a product x might be strongly linked to the demand for a related product y - demand for steel is strongly linked to the demand for cars
• there is a inverse relationship between the price of a good and demand
• ceteris paribus - the assumption that all factors are held constant except one
• reasons for downwards sloping demand curve:

  1. the income effect
  2. the substitution effect
  3. diminishing marginal utility