Economics
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Executive Summary
In this report, I will be distinguishing Demand and Quantity Demanded by stating the differences between both terminologies. By referring to the textbook which we are using throughout our course plus resources from the internet, I have been able to collect some information about the definitions of demand and quantity demanded. The factors which affect the movement along the curve and shifting of the curve have been stated in the following pages in this report. Demand and Quantity Demanded are different in terminologies and also literally. The demand and quantity demanded curve has differences and it can be seen in the figures which I had pasted below.
Table of contents
What is Economics?
What is Demand?
What is Quantity Demanded?
Differences
Conclusion
References
What is Economics?
It is the study of resource allocation, distribution and consumption, of capital and investment, and of the management of the factors of production. (
In short, economics is the study of how people allocating their limited resources.
What is demand?
According to the Economics textbook, “it refers to the range of quantities of a commodity, which a consumer is willing and able to buy at different price levels at a given time.” In short, it is where the customers are willing to buy supported by money.
The law of demand states that if everything remains constant (ceteris paribus) when the price is high the lower the quantity demanded. A demand curve displays quantity demanded as the independent variable (the x-axis) and the price as the dependent variable (the y-axis).
Price
Quantity
Demanded
$5.00
$4.00
$3.00
$2.00
$1.00
In the graph, it shows the law of demand; as the price increase there is a decrease in the quantity demanded. At a price of $5, the quantity demanded is only 10 but as the price decreases to $4, $3, $2 and $1 the quantity demanded increases to 18, 26, 38 and 53 respectively. This applies if all other things remain constant (ceteris paribus).
What is Quantity Demanded?
Quantity demanded “refers to a point on the demand curve – the quantity demanded at a particular price”. (
Quantity demanded is associated with the movement along the the demand curve. The factor in the change of the quantity demanded curve is price, as price gets higher the lesser the quantity demanded and as the price is lesser the higher the quantity demanded. The demand curve shows the movement along the curve. The higher the quantity demanded the movement will be downwards and as the lesser the quantity demanded the movement will be upwards.
The curve is downward sloping from left to right as it demonstrates the law of demand where the higher the price the lower the quantity demanded.
In the graph below when the price is 25 the quantity demanded is 15. When the price decreases to 10, the quantity demanded increases to 30.
If there is a change in demand resulting in the shift of the demand curve. Price is not a factor in this curve. The shifting of the demand curve is due to some factors. As the demand increase the shift will be to the right and if there is a decrease the shift will be to the left.
In the demand curve below, the price remain constant ($16) and the quantity demanded is 8.3. Due to the increase of the population, the quantity demanded increases which will result in the shift of the demand curve to the right (12).
The factors which can affect the demand curve causing it to shift are:
Tastes and Preferences
The taste and preferences of consumers constantly changes due to what they see, their age plus education. With the knowledge that they take in their everyday life, it shapes a different feeling or thinking which may change the things that they need or want.
Income
The higher the income will lead to more shopping. In other words the more the money the more things that consumers will buy. The more they buy things, the more the quantity demanded for goods. (If in this case the curve will shift to the right due to the increase in demand). Thus, the curve will shift to the left if the quantity demanded decreases. This applies to normal goods but not for inferior goods.
Coca-cola bottle imported from USA can be considered as normal goods as the term normal does not refer to the quality of the good. Whereas, a local Coca-Cola can is considered as inferior good as it is how the consumers observe about the production and not the quality of the good.
Future expectations
Some consumers have this thing of knowing what is going to happen to the prices in the future. This is not where the consumer consider themselves as a shrink or fortune teller but it is due to the trend of certain goods; when it is first released into the market the price will be higher or maybe lower and as time passes by the prices