The law of Demand

The Law of Demand

Contributors

Ben Whitten

Carys Brown

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The Law of Demand
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The Law of Demand states that the connection between the price of a product and the quantity demanded forms an inverse relationship. Put simply, this means that as the price of a product increases, the demand for the product falls. Also, as the price of a product rises, the quantity demanded of the good falls. 


There are two main reasons that this occurs. 

As the price of a product increases, if consumers where to purchase this good, their real income would fall as it takes up a larger percentage of their income and budget. This means that as prices increase, the quantity demanded falls as goods may be pushed out of peoples budgets. 

Furthermore, as the the price of products increase, substitute goods will become more popular to allow consumers. For instance, as the prices of chocolate increases, alteranatives will have a higher level of demand, such as ice cream or buscuits. 

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Individual and Market Demand
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Individual Demand refers to demand of a single person for a certain product within a market. For instance, your personal level of demand for a ice-cream considering your level of income and satisfication. 

Market Demand refers to the combined demand of all individuals within a market. This means that each person's unique level of demand for a good or service has been added into a demand curve. 

Topic Menu
The Law of Demand
Non- Price Factors of Demand
Effects of Changes in Price
Effects of Changes in Non-price Factors

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