Demand, in economic terms, refers to the quantity of a product or service consumers are willing and able to buy at a given price at a certain time. The idea behind demand is based on the law of demand, which states that, all else being equal, the lower the price of a product or service, the higher the demand, and vice versa. Demand is influenced by several factors including price, consumer income, tastes or preferences, and the price of related goods.
1. What is the Law of Demand?
The Law of Demand is an economic principle that states that as the price of a good or service increases, the quantity demanded decreases, and vice versa, assuming all other factors remain unchanged. This is considered a fundamental concept in economic theory.
2. What factors affect demand?
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Several factors affect demand including the price of the product or service, consumer income, tastes or preferences, price of related goods or services, and the consumer’s expectations of future prices or income.
3. What is a Demand Curve?
A demand curve is a graphic representation of the relationship between the price of a good or service and the quantity demanded for a given period. The curve typically slopes downward from left to right, indicating the inverse relationship between price and quantity demanded.
4. How does consumer income affect demand?
Consumer income is a critical factor in determining demand. As income increases, consumers are usually willing to purchase more goods or services, therefore increasing demand. Conversely, if income decreases, consumers would likely cut back on their spending, causing a decrease in demand.
5. How do tastes or preferences affect demand?
Tastes or preferences play a significant role in influencing demand. If consumers develop a strong preference for a particular product or service, the demand for it will increase, even if the price also rises. Similarly, if the preference for a product decreases, its demand would also decrease.