Unformatted text preview: Market Demand: The demand by all the consumers of a given good or service. Market demand schedule Law of Demand: Holding everything else constant, when the price of a product falls, the
quantity demanded of the product will increase, and when the price of a product rises, the quantity demanded of the product will decrease.
Inverse relationship between the price of a product and the quantity of the product demanded.
The law of demand can be explained with the help of substitution effect and income effect. Substitution effect: The change in the quantity demanded of a good that results from a change
in price making the good more or less expensive relative to other goods that are substitutes. Income effect: The change in the quantity demanded of a good that results from the effect of a
change in the goods price on consumer purchasing power. Hence, if the price of a good decreases your real income increases. Ceteris paribus: All else equal. ...
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- Spring '11