Change in quantity demanded

Date: 2015-10-07; view: 542.

Why is Demand Important?

Text A

While reading the text match the questions to the answers.

· What is the relationship between elasticity and revenues?

· What are the determinants of demand elasticity?

· What is demand elasticity?

· How can we determine elasticity?

· How do we determine total expenditures? Why is it very important?

Fortunately, the concept of demand is easy to understand because it involves only two variables - the price and quantity of a specific product at a given point in time.

So, when it comes to demand, there are two types of changes that can occur. When the price of a product changes while all other factors remain the same, we have a change in the quantity demanded. Sometimes other factors change while the price remains the same - when this happens, we see a change in demand.

Only a change in price can cause achange in quantity demanded. When the price goes down, the quantity demanded increases. When the price goes up, the quantity demanded decreases. Both changes appear as a movement along the demand curve.

Sometimes other factors change while the price remains the same. When this happens, people may decide to buy different amounts of the product at the same price. This is known as a change in demand.As a result, the entire demand curve shifts - to the right to show an increase in demand, or to the left to show a decrease in demand. Therefore, a change in demand results in an entirely new demand curve, while a change in quantity demanded is a movement along the original demand curve. Demand can change because of changes in the determinants of demand: consumer income, consumer tastes, the price of related goods, expectations, and the number of consumers.