HSS646 Principles of Economics

2022-01-17

Demand

Demand Function

$Qd_z = f(P_x)$ $Qd_z = f(P_x, \text{Income}, P_{\text{competition}}, \text{Preference and Taste}, \text{Future Expectation},\text{# Consumers})$

All else being same, we want to reduce $P_x$

Demand curve

Non Price factors

Taste and Preferences change with age, social position, trends etc which cannot be qunatitatively defined

Income

Demand is willingness and ability to pay

Price of Related Goods

• Substitute or complementary goods
• Income Effect and Price Effect
  • In some cases, IE > PE and sometimes, PE > IE
  • Affected by non economic factors

Substitute Goods

X and Y are substitutes if an increase in P(Y) increases Q(X) and vice-versa.

Complementary Goods

X and Y are complementary if increasing Q(X) increases Q(Y)

Veblen Goods

Upward sloping Demand Slope