Demand

Topics
Demand
Law of Demand
Quantity Demanded
Factors affecting decrease and increase in
demand
What is Demand?
An economic principle that describes a
consumer’s desire and willingness to pay a
price for a specific good or service.

Three elements of demand:

1. Desire to acquire a commodity
2. Willingness to pay price for it
3. Ability to pay for it
Law of Demand
Part 1. As PRICE increases, DEMAND decreases

Demand goes down

Price goes up
THEN

Part 2. As PRICE decreases, DEMAND increases

Price goes down

THEN Demand goes up

Law of Demand
the law of demand states that the quantity
demanded of a good falls good rises when
the price of the , if other things affecting
demand stay the same or constant (citrus
Paribas) .
-There is a Negative relationship price and
Quantity Demanded
Ceteris Paribus
( Ceteris Paribus ) is a Latin phrase that
means "all other things affecting demand
should be constant. Or all other variables
remain the same.
Quantity Demanded
The quantity demanded of any good is
the amount of good that the buyers are
willing and able to buy.

Qd
Demand Curve
A graph that illustrates the demand for a product
It shows how much consumer desire for a product
changes as the price changes
 5- The Demand Schedule
▪ a table that shows the Price Quantity
relationship between the of of coffee
cofee demanded
price of a good and the
quantity demanded $0.00 16

▪ Example: 1.00 14
Helen’s demand for coffee . 2.00 12
3.00 10

▪ Notice that Helen’s 4.00 8

preferences obey the 5.00 6
Law of Demand. 6.00 4
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 6- Demand Curve
Price of Price
Quantity
Coffee of
of coffee
$6.00 coffe
demanded
e
$5.00
$0.00 16
$4.00
1.00 14
$3.00 2.00 12
$2.00 3.00 10

$1.00 4.00 8
5.00 6
$0.00
Quantity6.00 4
0 5 10 15 of coffee
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7-Demand curve slope
▪ Slope = change in price

change in Quantity

= new price – origin price

new Qd – origin Qd
= 60 - 80
500 - 300
= -20 / 200 = - 0.1

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Market Demand Curve: This curve illustrates the
quantities of apple juice demanded at each price ay
all consumers in the market.
Price of a Quantity
bottle of demanded per
Apple Juice week
$3
Price per bottle (in dollars)

$2

$2
Demand
$0.75 800
Curve
$1

$1
$1.00 650
$0
50 200 350 500 650 800 $1.25 500
Bottles of Apple Juice per
week
$1.50 350
$1.75 200
$2.00 50
Change in Demand
A demand curve is only accurate as long as there
are no changes other than price that could affect a
consumer’s decision
When factors other than price (non-price factors)
affect the demand curve, the entire curve shifts to
the left or to the right.
Non-Price Factors that effect
Demand
These factors will cause the demand curve to shift
to the left (less quantity demanded) or to the right
(more quantity demanded).
Factors that are shifting the Demand
Curve ( shifters )

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 9- Difference between (change in quantity demanded) &
(change in demand)
▪ When the price of good changes = movement on the same
curve that lead to (change in Qd).
▪ When the other factors changed = shifting the entire curve
it means (change in the Demand) .
✓ Increasing in Demand = shifting to right side
✓ decreasing in Demand = shifting to left side

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 1- Number of Buyers
▪ Increase in the Number of buyers
increases the quantity demanded Qd at each price,
that shifts the Demand curve to the right .
▪ Reasons :
▪ More advertising = More Demand
▪ More Branches = More Demand
▪ More Trade = More Demand

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 2. Income of Consumers
▪ Demand for a normal good is positively related
to income.
▪ Increase in income of consumer causes
increase in quantity demanded at each price,
shifts D curve to the right .
▪ But for other Goods like Inferior Goods it’s
different relation .

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▪ are the products that are lesser in quality and cheaper in price and has
a lot of alternatives .
▪ (Demand for an inferior good is negatively related to income.
▪ An increase in income shifts D curves for inferior goods to the left

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 Giffen Goods
▪ Giffen goods are low-priced products Related to
low income level people , also non-luxury goods.
▪ These products are necessary to fulfill the need
for food, and they have only a few substitutes.
▪ Demand for Giffen goods rises even when the
price rises .

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 3- Prices of Substitutes
▪ Substitutes: are Two goods are used for the same
purpose

▪ they may be identical, similar, or comparable to

another product, and they can either fully or
partly satisfy the same needs of the customers.
▪ Therefore, the consumer can replace one by
another .

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 An increase in the price of one good ,
causes an increase in demand for the other.

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 Examples
▪ Example: pizza and hamburgers.
An increase in the price of pizza
increases demand for hamburgers,
shifting hamburger demand curve to the right.
▪ Other examples: Coke and Pepsi,
laptops and desktop computers,
CDs and music downloads

THE MARKET FORCES OF SUPPLY AND DEMAND 25

 4- Complements
▪ Two goods are complements when one is used jointly with
another one .
▪ if the price of one increase , the demand of athe other falls.
▪ Example: computers and software.
If price of computers rises, people buy fewer computers,
and therefore less software.
Software demand curve shifts left.
▪ Other examples: college tuition and textbooks, bagels and
cream cheese, eggs and bacon

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 5- Tastes & preferences of
consumers
▪ Anything that causes a shift in tastes toward a good will
increase demand for that good
and shift its D curve to the right.
▪ Examples:
✓ Brand loyalty.
✓ if a celebrity endorses a new product, this may increase the demand for a
product.
✓ McDonald's began offering the classic combo of hamburgers and fries.
They originally didn't offer salads or frappes. But, over time, their customers
wanted healthier foods, so McDonald's responded and began offering healthy
alternatives, such as salads, fruits, wraps, and oatmeal.

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6-
 Variables That Influence Buyers
Var iable A change in this variable…

Price …causes a movement

along the D curve
# of buyers …shifts the D curve
Income …shifts the D curve
Price of
related goods …shifts the D curve
Tastes …shifts the D curve
Expectations …shifts the D curve
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 True or false

The quantity demanded of a product is the

amount that buyers are willing to purchase

regardless the ability to pay theprice.

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True or false

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True or false

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True or false

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 True or false

The demand curve is the upward-sloping line

relating price and quantity demanded.

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If the demand for a good falls when
income rises , then the good is
called an inferior good.

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 True or false
▪ Cocoa and vanilla are complements, so
a decrease in the price of cocoa will

cause an increase in the demand for

vanilla .

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