Demand

The quantity of a good/service that consumers are willing and able to buy at a given price, at a particular time.

Typically slopes downwards - shows the relationship between price and quantity demanded

• Changes in tastes and fashion

• Changes to people’s income. If real income increases:

  • Demand for normal goods will increase

  • Demand for inferior goods will decrease

Goods which are alternatives to each other. An increase in the price of one good will decrease its demand and increase the demand for its substitutes (‘competitive demand’)

Goods that are often used together so are in joint demand. The increase in the price of one good will cause the demand for both to decrease.

Demand for a good or a factor of production used in making another good or service

Demand for goods which have more than one use

A measure of how the quantity demanded of a good responds to a change in its price

% change in quantity demanded/ % change in price

PED > 1

A % change in price will cause a larger % change in quantity demanded

0 < PED < 1

A % change in price will cause a smaller % change in quantity demanded.

PED = +-1

The size of the % change in price is equal to the size of the % change in quantity demanded.

How much the demand for a good changes with a change in real income.

% change in quantity demanded/ % change in real income

A measure of how the quantity demanded of one good responds to a change in the price of another good.

% change in quantity demanded of Good A/ % change in price of Good B

The XED for substitute goods will be positive

The XED for complementary goods will be negative.

• Substitutes

• Type of good/service

• % of income spent on good

• Time

Normal goods have a positive YED (0 < YED < 1)

Inferior goods have a negative YED (YED < 0)