The law of demand
inverse relationship between the price of a good and demand.
Contraction of demand
Extension of demand
Exceptions to the law of demand
If income decreases, demand for staple goods increases
Meat becomes relatively more expensive, so more bread is purchased to film stomachs
rise in the market price
to increase revenue or profit
Decrease in the market price
to reduce loses
'snob value effect'
high-income elasticity of demand
Reasons for downward sloping demand curve
If the price of a good falls the product is now relatively cheaper than an alternative item, so some consumers switch their spending from the more expensive good to the cheaper good
Diminishing Marginal Utility
The Income effect
If the price of a good falls, consumers can maintain current consumption for less expenditure. Provided that the good is normal, some of the resulting increase in real income is used by consumers to buy more of this product.
Goods have more than one use
the quantity of a good or service that consumers are able and willing to buy at a given price in a given time period.
Change in the Income of Consumers
Changing Prices of a Substitute Good
goods in competitive demand and act as replacements for another product (e.g. Coke and Pepsi)
depends on whether consumers have sufficient information about prices for different good
Changing Price of a Complementary Good
Complementary goods are said to be in joint demand (e.g. fish and chips). A fall in the price of a complement to Good X should cause an increase in demand for X (e.g. A fall in the price of Smart Phones would cause an increase in the demand for Smart Phone Accessories and Smart Phone Apps).
Change in tastes and preferences
A market is where buyers and sellers exchange goods and services for money.
Regional markets, e.g. housing and labour
Movement along the demand surve
Contraction along the demand curve
..because of a SUPPLY shift