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DEMAND THE LAW OF DEMAND The law of demand states that the quantity demanded by consumers falls as price rises (and vice versa) The quantity demanded for a good at each price level can be shown on a demand schedule. Price (cents) Qty Demanded 20 40 60 80 100 240 200 160 120 80 Price (cents) Qty Demanded 20 40 60 80 100 240 200 160 120 80 By plotting the points onto a graph, a demand curve can be derived. Price (c) Qty As price rises from 60c to 80c, quantity demanded contracts from 160 quantity to 120. demanded At 60c, There is a movement along is 160 the demand curve! Price 12 0 100 80 60 40 20 D 0 40 80 120 160 200 240 Quantity Contraction and Expansion A contraction in quantity demanded occurs when the price of a good rises. This is shown as a movement along the curve. An expansion in quantity demanded occurs when …………… INCREASES and DECREASES in DEMAND An increase or decrease in demand occurs for any factor other than price. • there is a shift of the curve • an increase in demand sees a shift of the curve to the right • a decrease in demand sees a shift of the curve to the left Price (cents) Qty Demanded New Qt Demanded 20 40 60 80 100 240 200 160 120 80 280 240 200 160 120 Any factor other than price will cause a shift of the demand curve. At 60c, demand will rise from 160 to 200 at the same price. Price 12 0 100 80 60 40 D2 20 D1 0 40 80 120 160 200 240 Quantity