Introducing Supply and Demand
1. Demand - The Law of Demand
Explain the concept of demand and discuss the factors that affect it
- The demand curve is downward sloping, indicating the negative relationship between the price of a product and the quantity demanded.
- For normal goods, a change in price will be reflected as a move along the demand curve while a non-price change will result in a shift of the demand curve.
- Two exceptions to the law of demand are Giffen goods and Veblen goods.
- Giffen good: A good which people consume more of as only the price rises; Having a positive price elasticity of demand.
- Veblen good: A good for which people's preference for buying them increases as a direct function of their price, as greater price confers greater status.
- Normal good: A good for which demand increases when income increases and falls when income decreases but price remains constant.
In economics, the law of demand states that the quantity demanded and the price of a good or service is inversely related, other things remaining constant. Therefore, the demand curve will generally be downward sloping, indicating the negative relationship between the price of a good or service and the quantity demanded.
Source: Lumen Learning, https://courses.lumenlearning.com/boundless-economics/chapter/demand/
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