The Price System: Demand & Supply

Demand

Demand is the quantity of a good consumers are willing and able to buy at each price in a given period. The law of demand states that, ceteris paribus, as price falls quantity demanded rises — giving a downward-sloping demand curve. Two reasons: the income effect (a lower price raises real income) and the substitution effect (the good becomes cheaper relative to alternatives).

Distinguish a movement along the curve (caused only by a change in the good's own price) from a shift of the whole curve (caused by a change in a non-price determinant):

income (normal vs inferior goods),
prices of substitutes and complements,
tastes/fashion and advertising,
population and expectations.