The Nature of Demand

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Demand refers to the various quantities of a good or service that would be purchased at various prices during a period of time, as well as the concept of a desire and ability to purchase.

It does not, however, refer to a specific amount at a specific price BUT a series of amounts at associated prices.

P (price) and Q (quantity) can be shown by a demand schedule.

Price of Apples: .50 .45 .40 .35
Quantity /week: 100 110 120 130

Notice the above is in an INVERSE relationship!!!

Why an inverse relationship, you ask?

1) As P of apples drop, a greater # of buyers can buy.
2) Those buying apples before can now buy more.
3) Kiwi, Orange and Banana buyers will switch to apples.

Notice that when price changes, movement is ALONG the line on the demand graph (not shown here). This is also known as a "Change in Quantity Demanded".

There are other factors that can affect a change in demand, and they are denoted by the acronym "PIPER". Remember that these changes actually move the entire demand curve, since they are not classified as changes in quantity demanded.

Population

quantity of a good bought is a reflection of the number of buyers in the market

Income

if a person's income goes up then they can buy more of a good OR
new consumers may enter the market if their income increases

Preferences & Tastes

as people's tastes change, the demand for various goods changes accordingly
e.g. health foods, minivans, SUV's

Expectations of Future

if consumers expect a price increase in the future, they may stock up now OR
they may delay a purchase if they expect the price to drop later on, OR
an expected change in income (usually an increase) may afect consumer spending now

Related Goods

if the price of lemons increase, then demand limes (substitute) may increase
if the price of computers decrease, then the quantity of floppy disks (complementary good) may increase

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