Consumers' willingness and ability to pay for a particular product/service
Amount you actually plan to buy at a give price
Supply of demands of all individuals willing and able to buy a particular product/service
Law of Demand
Quantity demanded of a product/service decreases if price of the product/service rises. Increases if price of product/service falls.
Five Ways to Change Demand
1.Prefences 2.Prices of related products 3.Income 4.Expected future prices 5.Number of consumers
Increase of Demand
Increase in consumers willingness and ability to pay
Decrease of Demand
Decrease in consumers willingness and ability to pay
Change in preference
Causes a change in demand, not a change in quantity demanded.
Products and services used in place of each other to satisfy the same want.
Products/Services used together to satisfy same want (Batteries & Camera)
Products/Services you buy more of when you income increases
Products/Services you buy less of when you income increases
Elasticity (Price Elasticity of Demand)
Measures by how how much quantity demanded responds to a change in price. Think responsiveness!
For elastic demand large response in quantity demanded when price rises (The more and better subsitutes available the greater the elasticity) You determine demand as elastic when (% change in quantity)/(% change in price) = more than 1
For inelastic demand small response in quantity demanded when prices rises (Medication) You determine demand as inelastic when (% change in quantity)/(% change in price) = less than 1
All money a business receives from sales, equal to price per unit ℗ multipled by quantity sold (q)