Demand

The demand for a commodity is the total quantity demanded by an individual consumer, hence, one can talk about the demand for milk, potatoes, bread , etc. People at present talk about the renewed demand for housing. What
is the significance of this?

What is an economic good?

The following are the characteristics of an economic good:

Assumptions relating to economic behaviour

Important definitions

A law of diminishing marginal utility =
as more of a good is consumed the utility from the last unit of the good consumed eventually begins to decline after a certain point is reached.
The law is based on the following qualifications:

The law of equi-marginal principle

This law states that a consumer will gain the maximum satisfaction if he/she spends their income in such a manner that the ratio of marginal utility to price is the same for all goods which he buys.

FORMULA: = MU1 = MU2= MU3……
                            P1        P2         P3

The shape of the normal demand curve is downwards from left to right due to the law of equi-marginal principle
What are the factors which influence consumers demand?

Demand for A=f(Pa, Pog,Y, T, E,G,U,)

The normal demand curve has a negative slope ,and slopes downwards from left to right,illustrating the negative relationship between price and quantity.

A perverse demand curve: in this case as price rises demand rise, and when price falls demand falls---an example here are giffen goods or snob goods.


A movement along a demand curve is caused by a change in price in price of the good in question.

A shift in a demand curve is usually caused by a change in any of the factors which affect demand e.g. price of substitutes/compliments, income, taste etc. an increase in income will shift the demand curve to the right.