Back to Basics Part 1 : DEMAND

What is demand? 

• Demand is the quantity of goods or services that consumers are willing and able to purchace at given prices over a given time period.
• The law of demand states that, as the price of a good falls, the quantity demanded of therpoduct will usually increase, ceteris paribus. (Ceteris paribus is an assumption  that means "all other things being equal")
• An example is the soft drink market. The following graph demonstrates the rule above. 

• As you can see, when the price falls, the demand increases. This is for 2 reasons-
• Income effect- When the price of a product falls, the people will have an increase in their real income, which reflects the amount that their income will buy. 
• Substitution effect- When the price of the product falls, it will be relatively more attractive to people than other goods.
• Factors affecting demand other than price- 
• Income
• Price of other products
• Taste and preferances
• Advertisement
• Population and Age structure
• Other factors such as government policies, etfc.
• A change in any of these factors (other than price), will shift the demand curve, for example: