As Economics Unit 1 Revision

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Submitted By louis1
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Demand: the quantity of a product that consumers are able and willing to purchase at various prices over a period of time
Market: where or when buyers and sellers meet to trade or exchange products.
It is important to remember that a want and demand are entirely different what consumer’s want they may not actually purchase.
Notional Demand: The desire for a product
Effective Demand: The willingness and ability to buy a product
The definition of demand assumes that the only factor affecting demand is price, economists refer to this as ceteris paribus
Ceteris Paribus: Assuming other variables remain unchanged
The relationship between demand and quantity is INVERSE
In every market there are always people who are willing to pay above what they actually pay.
Consumer Surplus: the extra amount that a consumer is willing to pay for a product above the price that is actually paid!

The determinants of Demand
Consumer Income
Real disposable Income: income after taxes on income have been deducted, state benefits have been and added AND the result is adjusted to account for changes in prices!
For Example:
If the money I receive from my job increases by 5% but prices also increase by 3% then my real income only increases by 2%

Therefore if consumer income increases then so does demand but if it falls demand falls because they lose the ability to pay for the good.

Normal Goods: goods for which an increase in income leads to an increase in demand, they also have a positive income elasticity of demand.

Inferior Goods: goods for which an increase in income leads to a fall in demand

It is difficult to generalise with inferior goods because it is different for different people.

The Price of other products:

The demand for a product can be affected by a change in price for another different product…...

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