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Economics - Demand and Supply

Essay by   •  June 13, 2012  •  Essay  •  510 Words (3 Pages)  •  1,775 Views

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A of demand is the amount product consumers willing and able to purchase a product or service at a given price, while other factors are remains the same. Demand is also a simply statement of a buyer's plan, or intention, with respect to the purchase of the product. As the demand for the products or services increase, its price will increase, holding all other factors constant. An increase in demand will shift the demand curve to the right.

There are a few determinants that cause an increase of demand. The first determinant is taste. If the taste or the preference of a product becomes more favourable to the consumers, the demand for that particular product will increase. Next is income. The demand curve for the normal goods will shift to the right when the income of the consumers rises as the consumers will have the tendency to spend more on luxurious items. On the other hand, the demand for inferior goods will increase when the income of the consumers lowers.

Moreover, an increase in the price of substitute goods (such as Pepsi and Coke) will and a decrease of the price of complementary goods (such as hotdogs and mustard, automobiles and gasoline) will also shift the demand curve for the product to the right.

A change in consumers' expectations will also shift the demand curve. If consumers think that a product, say for example land has a higher future price, they will buy land in the present, hoping to earn some money when they successfully sell the land in the future. Lastly, the demand for a product will also increase when the population of a place increases.

The quantity demanded is the total amount of demands for the goods or services at any one time in the market. The quantity demanded for the goods or services in the market relies on its price. The quantity demanded by the consumers is determined at any given point along the demand curve. An increase in quantity demanded will move the point along the demand curve downwards.

An increase in quantity demanded will move the point on the demand curve downwards.

It is cause by a change n the market price of the product. When the price of the product decreases, it will be more affordable. Therefore the quantity demanded for the product will increase, and the point on the curve will move downwards. For example when the price of an bread is RM 2, the quantity demanded for the bread is 5; but when the price of the bread reduces to RM 1, the quantity demanded for the bread will be 10.

The distinction between an increase in demand and an increase in the quantity demanded is important because these concepts are totally different. Besides that, the distinction is important so that people would not be confuse with demand and quantity demanded. We have to refer to the demand curve when we speaking of demand. To determine the quantity

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