1.2.1 - demand

• Demand is the amount of a good that consumers are willing and able to buy at a given price
• normal goods increase in demand as consumer incomes rise
• as incomes rise demand for inferior goods falls
• an extension in demand is when the price decreases, a contraction in demand is when the price increases
• factors that will shift demand includes population, advertising, substitutes, incomes, trends, external factors and complements
• The basic law of demand is that demand varies inversely with price – lower prices make products more affordable for consumers.
• A fall in price increases the purchasing power of customers. This allows customers to buy more with a given budget. For normal goods, demand rises with an increase in incomes
• A fall in the price of good X makes it relatively cheaper compared to

  substitutes. Some customers will switch to good X leading to higher demand. Much depends on whether products are close substitutes