Demand Flashcards
What is demand?
Demand is the amount of good or service that consumers are willing and able to buy at various prices over a period of time, ceteris paribus.
What is the law of demand?
The law of demand is that price and quantity demanded have an inverse relationship, ceteris paribus.
What are the non-price determinants affecting the demand curve?
“EGIPTWIPE”
- Expectations of future prices
- Government regulation
- Income of households
- Prices of related goods
- Taste and preference
- Weather
- Interest rate
- Population/demographic change
- Exchange rate
What are expectations of future prices?
E.g.: If gold’s price to increase in a few months, more people will buy now.
What are government regulations?
Government promotes something, more people want to buy, hence, demand increases.
What are income of households?
As income increases, willingness and ability to spend money increases, hence demand increases.
What are prices of related goods?
Substitute: If the price of a related good decreases, the demand of the original good decreases.
Complements: If the price of a related good increases, the demand for original good increases (E.g. car and petrol).
What is taste and preference?
Due to a fashion trend, demand for the specific good increases.
What is weather?
E.g.: If its winter, the demand for winterwear increases.
What is interest rate?
E.g.: Interest rate of house mortage increases, demand for houses decrease.
What is population/demographic change?
E.g.: Ageing population in SG, demand for affordable healthcare increases.
What is exchange rate?
E.g.: $1 = RM3, thus demand for Malaysian bought items increase.
