Demand

• Demand is defined as the quantity of a good that a consumer is willing and able to pay at each possible price during a given time period, ceteris paribus.
• Demand indicates the relationship between the price of a good and the quantity of the good demanded, over a given time period.
• The Marginalist Principle of Demand states that consumers will maximise their utility only when they consume a good up to where Marginal Benefit = Marginal Cost.
• Marginal Benefit is the additional benefit from consuming an additional unit of the good.
• Marginal Cost is the additional cost from consuming an additional unit of the good which is its price.
• Quantity Demanded is defined as the amount of a good that a consumer is willing and able to buy at a given price over a given time period.
• Individual demand is the demand of one consumer, whereas the market demand is the sum of the demands of all the consumers in the market.
• Non-Price Determinants of Demand:

  • Level and distribution of income
  • Price and availability of related goods
  • Taste and preferences
  • Government policies
  • Demographic of the population
• The Law of Demand states that in a given time period, the quantity of a good demanded is inversely related to its price, ceteris paribus.
• As consumers' income rises, their ability to buy normal goods increases and, as rational utility maximisers, they will increase their demand for most goods. This is represented by a rightward shift of the demand curve.
• Subsitutes are defined as a pair of goods considered by consumers to be alternatives to each other with the level of utility derived from consuming either good is relatively similar.
• Assuming competitive demand, will the demand of good B shift leftwards or rightwards?

  Leftwards

  
• Assuming competitive demand, will the demand of good B shift leftwards or rightwards?

  Rightwards

  
• Complementary goods are defined as a pair of goods consumed together to satisfy the same want.
• Assuming joint demand, will the demand of good B shift leftwards or rightwards?

  Leftwards

  
• Assuming joint demand, will the demand of good B shift leftwards or rightwards?

  Rightwards

  
• The more desirable consumers find a good, ceteris paribus, the more of it they will demand at any given price to maximise their utility. This is represented by a rightward shift of the demand curve.
• If consumers anticipate that the price of a good will fall significantly in the near future, ceteris paribus, the current demand for the good is likely to decrease. This is represented by a leftward shift of the demand curve.
• As the population ages, ceteris paribus, goods that the elderly deem necessary will lead to a increase of demand for said goods. This can be represented by a rightward shift of the demand curve.
• A change in demand arises only from a change in non-price factors whereas a change in quantity demanded arises only from a change in the price of the good itself.
• This is a demand curve:

  A) quantity demanded

  B) price

  C) quantity

  D) demand