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In economics, demand describes a consumer's desire, willingness and ability to pay a price for a specific good or service.The law of demand states that quantity demanded moves in the opposite direction of price (all other things held constant), and this effect is observed in the downward slope of the demand curve. Demand refers to how much (quantity) of a product or service is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price. There is a strong relationship between price and quantity demanded (see the demand curve). The term demand signifies the ability or the willingness to buy a particular commodity at a given period of time.

Introduction Economists record demand on a demand schedule and plot it on a graph as a demand curve that is usually downward sloping. The downward slope reflects the negative or inverse relationship between price and quantity demanded: as price decreases, quantity demanded increases(all other things held constant). Every consumer has a demand curve for any product that he or she is willing and able to buy. Consumer's demand is depend on consumer's marginal utility. When the demand curves of all consumers are added up horizontally,the result is the market demand curve for that product which also indicates a negative or inverse relationship between the price and quantity demanded. If there are no externality, the market demand curve is also equivalent to the social utility (benefit) curve.

Factors affecting demand Innumerable factors and circumstances could affect a buyer's willingness or ability to buy a good. Some of the more common factors are: Price changing: According to the low of demand, the quantity demand of a good and service only depends on its price. As the price of a good or service increases then the quantity demand will decreases (other factors are held constant). when the price of a good or service decreases, consumers are willing to buy more of the goods and services. Price of related goods: A complement is a good that is used with the primary good. Examples include hotdogs and mustard, beer and pretzels, automobiles and gasoline.(Perfect complements behave as a single good.) If the price of the complement goes up the quantity demanded of the other good goes down. The other main category of related goods are substitutes. Substitutes are goods that can be used in place of the primary good. For example, apple and orange. when the price of orange goes up, people tend to buy more apple instead of oranges. Generally, relationship between the price of the substitute and the demand for the good in question is positive. If the price of the substitute goes down the demand for the good in question goes down.

Personal Disposable Income: In most cases, when a person's disposable income increase, he/she has more money to spend on goods and services. Thus demand of some type of product(normal goods) will definitely increases.

Tastes or preferences: The greater the desire to own a good the more likely one is to buy the good There is a basic distinction between desire and demand. Desire is a measure of the willingness to buy a good based on its intrinsic qualities. Demand is the willingness and ability to put one's desires into effect. It is assumed that tastes and preferences are relatively constant.

Consumer expectations about future prices and income: a news report predicting higher prices in the future can increase the current demand as customers increase the quantity they purchase in anticipation of the price change. Thus if a consumer believes that the price of the good will be higher in the future he is more likely to purchase the good now. Or if the consumer expects that his income will be higher in the future the consumer may buy the good now.

Number of potential buyers - an increase in population or market size shifts the demand curve to the right.

Nature of the good:If the good is a basic commodity, it will lead to a higher demand much greater than consumer goods.

This list is not exhaustive. All facts and circumstances that a buyer finds relevant to his willingness or ability to buy goods can affect demand. For example, a person caught in an unexpected storm is more likely to buy an umbrella than if the weather were bright and sunny.

Demand functions A straight line demand curve formed by Qd = a - (b x Price) Where a and b are constants that must be determined for each particular demand curve. When price changes, the result is a change in quantity demanded as one moves along the demand curve.

Demand curve Demand curve is a graphical representation between price and quantity demanded. Its slope is negative showing that when price increases, then quantity demanded declines.

Shifts in the Demand Curve When there is a change in an influencing factor other than price, there may be a shift in the demand curve to the left or to the right, as the quantity demanded increases or decreases at a given price. For example, if there is a positive news report about the product, the quantity demanded at each price may increase, as demonstrated by the demand curve shifting to the right.(see demand curve shifting graph)

Moving on the demand Curve When there is a change in good's own price and all other factors held constant. Different price relative to a different quantity demand on the same demand curve.

Income and substitution effects Income effect is the impact that a change in the price of a good has on the quantity demanded of that good due strictly to the resulting change in real income (or purchasing power). Substitution effect is the impact that a change in the price of a good has on the quantity demanded of that good, which is due to the resulting change in relative prices(PX/PY) 1. the slutsky substitution effect: on consumer choice of changing the price ratio, leaving the consumers just able to afford his/her initial bundle. 2. the hicks substitution effect: on consumer choice of changing the price ratio, leaving her/ his initial utility unchanged.

Notice: when performing a diagram of income and substitution effect must define the type of goods and service carefully.

Discrete goods In some cases it is impractical to represent the relationship between price and demand with a continuous curve because of small quantities demanded. Goods and services measured in small units are best represented with a smooth curve. Examples include food measured in calories and leisure measured in minutes. However, when the price of a good is very high in proportion to a consumer's budget there is a need to incorporate this limitation in both the mathematical analysis and the graph representing the relationship. Price floor: using when the price of a good is too high. for instance when the rental price is above the equilibrium price then a price floor will be used to control the rental price. This may cause a shortage. Price celling: using when the price of a good is below the equilibrium price. This may cause a surplus.

Market structure and the demand curve In perfectly competitive markets the demand curve, the average revenue curve, and the marginal revenue curve all coincide and are horizontal at the market-given price.[17] The demand curve is perfectly elastic and coincides with the average and marginal revenue curves. The price is a horizontal line. Perfectly competitive firms have zero market power; that is, price can not be chosen by firms. A perfectly competitive firm's decisions are limited to whether to produce and if so, how much. In less than perfectly competitive markets the demand curve is negatively sloped and there is a separate marginal revenue curve. A firm in a less than perfectly competitive market is a price-setter. The firm can decide how much to produce or what price to charge. In deciding one variable the firm is necessarily determining the other variable. The demand curve is downward sloping.