THE THEORY OF
MARKET DEMAND
MICROECONOMICS
, DEFINITIONS
Demand = the quantity of a good or service that consumers are willing and able to buy at a given price in a given time
period.
(effective demand = able to pay only)
Individual demand = each individual decides how much of a product they wish to buy at a given price in a given time per
Market demand = sum of the individual demand for a product from buyers in the market.
Marginal utility = how much a consumer gains from buying an add. unit of a good.
Derived demand = demand for a FOP that results from the demand for the product it is used to make.
Normal good = an increase in income leads to a rise in demand.
Inferior good = an increase in income leads to a fall in demand.
Consumer surplus = the difference between the price consumers are willing and able to pay and the price they are charge
Exceptional goods:
Veblen good = certain luxury goods with status appeal that are consumed in greater quantities when their price rises.
Giffen good = cheap staple foods that are consumed in greater quantities when their price rises.
Speculative goods = as price rises, speculators believe the product’s price will continue to rise so continue to invest.
MARKET DEMAND
MICROECONOMICS
, DEFINITIONS
Demand = the quantity of a good or service that consumers are willing and able to buy at a given price in a given time
period.
(effective demand = able to pay only)
Individual demand = each individual decides how much of a product they wish to buy at a given price in a given time per
Market demand = sum of the individual demand for a product from buyers in the market.
Marginal utility = how much a consumer gains from buying an add. unit of a good.
Derived demand = demand for a FOP that results from the demand for the product it is used to make.
Normal good = an increase in income leads to a rise in demand.
Inferior good = an increase in income leads to a fall in demand.
Consumer surplus = the difference between the price consumers are willing and able to pay and the price they are charge
Exceptional goods:
Veblen good = certain luxury goods with status appeal that are consumed in greater quantities when their price rises.
Giffen good = cheap staple foods that are consumed in greater quantities when their price rises.
Speculative goods = as price rises, speculators believe the product’s price will continue to rise so continue to invest.
