Demand, Elasticity

• Demand and supply dynamics The concepts of demand and supply are fundamental principles in economics that describe the relationship between the quantity of a good or service and its price in a market. These concepts play a crucial role in determining the equilibrium price and quantity in a market.
• ·Demand refers to the quantity of a good or service that consumers are willing and able to purchase at various prices during a specific period.
• ·Law of Demand: This states that, all else being equal, as the price of a good or service increases, the quantity demanded decreases, and vice versa.
• ·Determinants of Demand: rice of the product, consumer preferences, income levels, the prices of related goods, and expectations about future prices.
• ·Supply represents the quantity of a good or service that producers are willing and able to offer for sale at different prices during a specific period.
• ·Law of supply asserts that, all else being equal, as the price of a good or service increases, the quantity supplied also increases, and as the price decreases, the quantity supplied decreases.
• ·Determinants of Supply: price of inputs, technology, government policies, and the number of sellers in market.
• The point at which the quantity demanded equals the quantity supplied is called the equilibrium. At this point, the market is in balance, and there is no inherent tendency for prices or quantities to change.
• ·The interaction of demand and supply in the market leads to the establishment of an equilibrium price and quantity, which are crucial in determining the efficient allocation of resources.
• Market dynamics Changes in demand or supply can lead to shifts in the market equilibrium. For example, an increase in consumer income or a change in consumer preferences can shift the demand curve. Similarly, changes in production costs or technology can affect the supply curve.
• Market dynamics When demand exceeds supply, there is typically upward pressure on prices. Conversely, when supply exceeds demand, there is downward pressure on prices.
• Market dynamics The price in a market is often considered the mechanism that brings demand and supply into balance. Prices rise and fall based on changes in demand and supply, guiding resources to where they are most valued in the economy.
• Margins:

  Gross margin

  Profit margin
• ·In business and finance, the gross margin is the difference between revenue and the cost of goods sold (COGS). It is expressed as a percentage of revenue and represents the profitability of a company's core operations.
• ·Profit margin is a broader measure of profitability, taking into account all expenses, including operating expenses, interest, and taxes.
• An increment refers to an increase or addition, often in a systematic or incremental manner. In mathematics or statistics, an increment can be a small positive or negative change in a variable.
• The mean, often referred to as the average, is a measure of central tendency. It is calculated by adding up all the values in a dataset and dividing by the number of values. ​
• Weighted Average In some cases, different values in a dataset may have different weights. The weighted average takes these weights into account.
• A moving average is a statistical calculation used to analyze data points by creating a series of averages of different subsets of the full dataset. It is often used in time-series analysis to smooth out short-term fluctuations and highlight longer-term trends.
• Averages:

  Mean

  Weighted average

  Moving average
• Demand Curve is a graphical representation of the relationship between the price of a good or service and the quantity demanded by consumers in a given market, holding all other factors constant.
• Demand curve It is a fundamental concept in economics and is used to illustrate how changes in price affect the quantity demanded, assuming other factors remain unchanged.
• Downward curve The law of demand states that, all else being equal, as the price of a good or service increases, the quantity demanded decreases, and vice versa. Therefore, a typical demand curve slopes downward from left to right.
• Price and Quantity Axes ·The vertical axis (y-axis) of the graph represents the price of the good or service, while the horizontal axis (x-axis) represents the quantity demanded. The specific units of measurement for price and quantity will depend on the context and the particular market being analyzed.
• Shifts vs. Movements A movement along the demand curve occurs when there is a change in the quantity demanded due to a change in price while other factors remain constant. A shift in the demand curve, on the other hand, occurs when one or more factors affecting demand, such as income or consumer preferences, change.
• Factors shifting demand curve Several factors can cause the entire demand curve to shift. These include changes in consumer income, preferences, the prices of related goods (substitutes and complements), expectations about future prices, and the number of consumers in the market.
• Individual vs. Market Demand the demand curve can represent the demand of an individual consumer or the aggregate demand of all consumers in a market.
• The market demand curve is derived by horizontally summing the individual demand curves at each price level.
• The steepness or flatness of the demand curve is influenced by the price elasticity of demand. If the quantity demanded is relatively responsive to price changes, the demand curve is considered elastic. If it is less responsive, the demand curve is inelastic.
• Represents the relationship between the price of a good or service and the quantity demanded by consumers. Various factors can cause a shift in the demand curve, indicating a change in the overall demand for a product.
• For most goods, an increase in consumers' income leads to an increase in demand, shifting the demand curve to the right. These are known as normal goods.
• Inferior goods In the case of inferior goods, as income increases, demand may decrease, causing the demand curve to shift to the left.
• Factors that can produce a shift in the demand curve:

  Income changes

  Price of Related Goods

  Tastes and preferences

  Expectations about Future Prices or Incomes

  Population
• Under Population:

  Market size

  Demographics

  Consumer preferences

  Income distribution

  Cultural and Social factors

  Population Growth or Decline
• Income changes:

  Normal goods

  Inferior goods
• Substitute goods ·If the price of a substitute good (a product that can be used in place of another) decreases, it may lead to a decrease in demand for the original good, shifting its demand curve to the left.
• Complementary goods ·If the price of a complementary good (a product that is used together with another) decreases, it may lead to an increase in demand for the original good, shifting its demand curve to the right.
• Tastes and preferences Changes in consumer preferences or tastes can significantly impact demand. Positive changes, like a sudden trend or popularity, can increase demand, shifting the curve to the right. Conversely, negative changes can lead to a decrease in demand, shifting the curve to the left.
• Expectations about Future Prices or Incomes If consumers expect prices to rise in the future, they may increase their current demand to take advantage of lower prices, shifting the demand curve to the right.
• Expectations about future prices or incomes Similarly, if consumers expect their incomes to rise in the future, they might increase their current demand, anticipating the ability to afford more, and this can shift the demand curve to the right.