2.2 economics
demand
demand is the quantity of a good that consumers are willing and able to buy
derived demand is demand that comes because of another prouct
the law of demand is the quantity of demand is inverse to the price
as price increases, demand falls & vice versa
market demand is the total demand for a good or service
a normal good is wen demand increases as income increases
my drawings
movements along the demand curve
a change in price is the only thing that can cause a movement
if there is an increase in quantity demanded, the price falls but demand wil explode
if there is a decrease in quantity them firms will have to raise prices to ensure they get a profit
shifts along the demand curve
this is when the whole curve moves to the left or right and can be caused by many factors
fashion - if your product is fashionable then more people are going to want it
substitutes - if your product compliments another product and something changes to they product it will have an effect on your product, eg staberries and cream. if the price of cream rises then the demand for strawbrries will all
marketing - if you advertise your product then people are going to want it
policies - if tax or something is introduced to your product then people are less likely to buy it
population - if there are more people then demand will increase
income - if everyone is earning more then they are more likely to buy your product because they can afford it
if there is a right shift, demand increases but prices stay they same
if there is a left shift then demand decreases
Price Elacicity of Demand
PEd is how responsive demand is to change in price
elastic - if there is a small change in price then this will have lots of effect on demand
inelastic - if there is a change in price then it wont really have much of an effect on demand, firms want their product ot be inelastic so they can raise the rpice
you can calculate PED by doing
unitary demand means a price change will lead to an exact change in demand and the PED is 1
consumers - if a product is inelastic then that means they consumers will have to pay lots for it, this isnt good for consumers
if producers have a good knowledge of PED then it can help them to price products correctly and respond to changes