Demand
Demand refers to the quantity of a good or service that consumers are willing and able to purchase at various price levels during a given time period. The Law of Demand states that, ceteris paribus, as price falls, quantity demanded rises — reflecting an inverse relationship between price and quantity demanded. This relationship is illustrated by a downward-sloping demand curve.
Key Terms & Definitions
Demand
The quantity of a good or service that consumers are willing and able to buy at a given price over a given time period.
Law of Demand
Ceteris paribus, as the price of a good falls, the quantity demanded rises, and vice versa.
Ceteris Paribus
A Latin phrase meaning 'all other things being equal' — used to isolate the effect of one variable.
Effective Demand
Demand backed by both willingness and ability to pay — distinguishes from mere desire.
Non-price Determinants
Factors other than price that shift the demand curve: income, tastes, prices of related goods, expectations, population.
Normal Good
A good for which demand increases as consumer income rises (positive income effect).
Inferior Good
A good for which demand falls as consumer income rises (negative income effect).
Substitute Goods
Goods that can replace each other in consumption (e.g., tea and coffee). A rise in the price of one increases demand for the other.
Complementary Goods
Goods consumed together (e.g., cars and petrol). A rise in the price of one decreases demand for the other.