(self Learnt) Demand In Econs Flashcards
Define Demand
Demand is the quantity of good/service that consumers are willing and able to buy at various prices, ceteris paribus
Signalling Effect
Changes in price signals changes in demand
Law of Demand + shape of graph + EG
- States there is an inverse relationship between price and quantity of demand of a good, ceteris paribus
- So demand line is always downwards
Eg: When price high, less ppl wanna buy so demand low.
When price decreases, more ppl want, so demand HIGH
The demand curve axis
Y (vertical) axis: Price
X (horizontal) axis: Quantity
All Non-Price Factors Affecting Demand
EGYPT PIE
E — Expected changes in future price
G — Govt regulations
Y — Income changes
P — Price of related goods
T — Taste & preference
P — population changes
I — Interest changes
E — Exchange rates
Expectations of future price affects on demand
(Non-price factors affecting demand)
When consumer expects prices to increase, they will buy more NOW to avoid paying in the future
- Leads to rise in demand NOW
- Tends to be non-perishable goods
Govt regulations Affecting Demand
(Non-price factors affecting demand)
- regulations forcefully cause demand to rise/fall
- excludes price factors like indirect tax and subsidies as these affect price
Eg: govt regulation banning PMDs on sidewalks
- Led to fall in demand for PMDs as less chance to use it
Y—Income of Households affecting demand
- When income rises, consumers will buy more of a good, ceteris paribus
- lead to rise in demand of goods
__BUT__
- depends on nature of goods & level of income::::;;
Normal good
Eg: Cars, smartphones, movies
—> Rise in demand when income rises
Inferior goods
Eg: Budget mobile phones, poor quality goods
—> Fall in demand when income rises
Price of Related Goods affecting demand
(Non-price factor)
2 types of related goods:
-
Substitutes
Eg: Coke & Pepsi
- Can be used in place of another good (aka competitive demand)
- Demand of either good may rise/fall due to innovation / other non-price related factors changing
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2. Complements
Eg: petrol & car - Used in conjunction with another good (aka joint demand)
- Demand of 1 product will rise when another product’s demand rises as they must be used tgt
Taste & preference affecting demand
- Influenced by advertising, fashion trends, education, culture, health considerations.
- leads to rise/fall in demand
Population changes affecting demand
No very impt
Ageing popu
- lead to rise in demand for healthcare services & products
Eg: Wheelchairs, hospitals
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Growing baby population
- demand for baby products will rise
Eg: stroller, milk powder
interest rates affect demand
- applies more to big ticket items like cars & properties
- interest rates increases as price of smth increases
Eg: when mortgage rates increase —> less affordable for ppl to borrow for a house due to higher costs
- to fall in demand
Exchange rates affecting demand
- E.R refers to the market price at which 1 currency can be changed for another.
Eg:
- If SGD appreciates, one SGD = More RM
-> Then trips to Malaysia will be cheaper
-> Lead to rise in demand for RM
Diff between demand and quantity demand
- Change in demandis due to non-price factors.
- change in quantity demand is due to price factors
