Chapter 6

• Ceteris Paribus is something that is used in the demand curve to isolate the price and demand variables
• Factors affecting demand:

  Price of the good itself

  Price of supplementary and complementary good

  Expected future prices

  Changes in consumer tastes

  Level of income

  Size of population and age distribution
• As price decreases, demand tends to increase
• What is this?

  The price-demand curve

  
• Contraction in demand: demand become less

  Expansion in demand: demand become more
• What is this?

  Demand increasing

  
• What is this?

  Demand decreasing

  
• When demand increases

  P will increase as Q stays the same

  P will stay some as Q increases
• When demand decreases:

  P decreases as Q will stay the same

  Q decreases as P will stay the same
• Factors that can cause a change in demand:

  1. Price of supplementary and complementary good/service
  2. Individual taste and preferences
  3. Future expected price of the product
  4. Income, future expected income, and income demographics
  5. Population size and age
• Consumer tastes and preferences include positive and negative network externalities and technological improvements that reach a wide range of consumer preferences
• Price of complement good and demand of product have direct relationship, meanwhile price of substitute good and product demand have an inverse relationship
• Expected future prices and demand have direct relationship
• Income levels and size of population only affect the quantity demanded more directly
• Certain age group require different types of products, thus, those products might have a higher demand
• Income distribution plays a huge role in demand as higher income level's Y value (C+S) increases, so does the demand for luxury goods and services. Vice Versa if their Y value decreases
• Price elasticity of demand: The responsiveness of quantity demanded to a change in price.
• Demand is the willingness and ability of a potential consumer to purchase a quantity of good/service at various price levels at a given point in time.
• Contractions and expanisions are a result of internal changes in a firm, meanwhile increase and decrease are a result of external changes in a firm.
• Factors that affect demand:

  1. Price of complementary and supplementary goods and services
  2. Consumer tastes and preferences
  3. Age proportionality of the population
  4. Future expected price of the product
  5. Rise in consumer incomes/change in income distribution
• Factors affecting elasticity of demand:

  • whether to good is luxury or a necessity
  • Whether it has any close substitutes
  • The expenditure on the product proportional to income
  • The time subsequent to price change
  • Whether the good is habit forming