The law of demand is the economic law that determines the quantity demanded of a good depending on its price and other influencing factors.
Summary
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- 1 Demand
- 2 Factors that determine demand
- 3 Law of demand
- 4 Demand curve
- 5 Movements in the demand curve
- 6 Shifts in the demand curve
- 7 See also
- 8 Sources
Demand
Demand represents the quantities of a good that a consumer is willing to buy for each price level, keeping the rest of the variables that influence it constant.
Demand determining factors
- Price of the good: As the price of a good increases, the quantity demanded decreases and vice versa.
- Price of substitute goods(goods that can satisfy the consumer’s need practically the same as the good in question, Examples margarine and butter, oil and natural gas).): If the price of the substitute good increases, the demand for the good increases and vice versa.
- Price of complementary goods(goods that are consumed together with the good in question. Example, tennis racket and tennis ball, cars and fuels.): When the price of a good rises, the quantity demanded of others decreases. goods that are complementary to the analyzed good. For example, if the price of gasoline increases, the demand for cars that use gasoline could decrease, because people will prefer vehicles that use cheaper fuels.
- Consumer income: In normal goods, as consumer income increases, the demand for a good will increase and vice versa. On the contrary, in inferior goods (of lower quality), as consumer income increases, the demand for the good will decrease. In luxury goods, a significant increase in consumer income increases demand and vice versa.
- Likes and preferences: by increasing preferences for a good (whether for fashion, season, etc.) the demand for it will increase.
- Population: As the population increases, it is expected that the demand for a good will increase since there are more consumers with the same need.
- Expected future prices: If the price of a good is expected to increase over a certain period, the immediate demand for this good will increase. On the other hand, if the price is expected to decrease in the future, demand will decrease now.
Law of demand
Economic law that determines that the quantity demanded of a good decreases as its price increases, keeping the remaining variables constant. The quantity demanded is inversely proportional to the price.
The increase in price (P) causes a decrease in the quantity demanded (Qd) and vice versa, the decrease in price will raise the quantity demanded.
Demand curve
The demand curve is the graphical representation of the relationship that exists between the quantity demanded and prices, that is, it is a curve that shows the quantities of a good that a consumer is willing to pay and can do so, to buy from different price levels
Demand curve
It has a negative slope, due to the inverse relationship that exists between prices and quantities demanded. As the price increases, the quantity demanded decreases, while if the price decreases, it increases.
Movements in the demand curve
The movements along the demand curve (variation of the quantity demanded) are caused by changes in the price of the determined good. When prices are high, the quantities demanded are low, and if prices decrease, the quantity demanded will increase.
By lowering the price, demand increases
Shifts in the demand curve
Shifts in the demand curve (variation in demand) are produced by changes in the rest of the factors that determine demand, except for the price of the product itself, that is, it results from changes in tastes, income, prices related goods (substitute or complementary), etc,
