Macro 4 notes

Quantity Demanded
The amount of any good, service, or resource that people are willing and able to buy during a specified period at a specified price.

Spring water costs $1, and you decide to buy 2 a day. The 2 are the quantity demanded of spring water.
The quantity demanded is measured as an amount 'per unit of time.' For example, your quantity demanded of water is 2 bottles per day. We could express this quantity as 14 bottles per week, or some other number per month or year. A particular number of bottles without a time dimension has no meaning.

The Law of Demand states-
Other things remaining the same, if the price of a good rises, the quantity demanded of that good decreases; and if the price of a good falls, the quantity demanded of that good increases.

Faced with a limited budget, people always have an incentive to find the best deals available.

Demand is the relationship between the quantity demanded and the price of a good when all other influences on buying plans remain the same. The quantity demanded is one quantity at one price. Demand is a list of quantitites at different prices illustrated by a demand schedule and a demand curve.

A demand schedule is a list of the quantities demanded at each different price when all the other influences on buying plans remain the same.

If a price of water is $2 a bottle, Tina buys no water. Her quantity demanded is 0 per day. If the price of water is $1.50, a bottle, her quantity demanded is ! bottle a day. Tina's quantity demanded increases to 2 bottles a day at a price of $1.00 a bottle and 3 bottles a day at a price of 50 cents a bottle.

A demand curve is a graph of the relationship between the quantity demanded of a good and its price when all the other influences on buying plans remain the same.

When the price of a good falls, the quantity demanded increases.

Market demand is the sum of the demands of all the buyers in a market.

The demand curve shows how the quantity demanded changes when the price of the good changes but all other influences on buying plans remain the same. When any of these other influences on buying plans change, there is a change in demand, which means that there is a new demand schedule and new demand curve. The demand curve shifts.

Demand can either increase or decrease. The main influences on buying plans that change demand are
-Prices of related goods
-Expected future prices
-Income
-Expected future income and credit
-Number of buyers
-Preferences

Prices of related goods
Goods have substitutes and complements. A substitute for a good is another good that can be consumed in its place. Chocolate cake is a substitute for cheesecake, and bottled water is a substitute for Gatorade.
A complement of a good is another good that is consumed with it. Wrist guards are a complement of in-line skates, and bottled water is a complement of fitness center services.
The demand for a good and the price of one of its substitutes move in the same direction. THe demand for a good increases if the price of one of its substitutes rises and decreases if the price of one of its substitutes falls. For example, the demand for wrist guards decreases when the price of in-line skates rises.

Expected Future Prices
A rise in the expected future price of a good increases the current demand for that good and a fall in the expected future price decreases current demand.

Income
A rise in income brings an increase in demand and a fall in income brings a decrease in demand for a normal good. A rise in income brings a decrease in demand and a fall in income brings an increase in demand for an inferior good.

Normal Good: A good for which demand increases when income increases and demand decreases when income decreases.
Name-brand food

Inferior good: A good for which demand decreases when income increases and demand increases when income decreases.
Store-brand food

Expected future income and credit
WHen income is expected to increase in the future, or when credit is easy to get and the cost of borrowing is low, the demand for some goods increases. And when income is expected to decrease in the future, or when credit is hard to get and the cost of borrowing is high, the demand for some goods decreases.
Changes in expected future income and the availability and cost of credit have the greatest effect on the demand for big ticket items such as homes and automobiles. Modes changes in expected future income or credit availability brings large swings in the demand for these items.

Number of buyers.
The greater number of buyers in a market, the larger is demand.

Preference influence demand.
When preferences change, the demand for one item increases and the demand for another item increases.
MP3 technology decreases the demand for CDs.

Change in Quantity Demanded versus change in demand

The influences on buyers' plans that you've just seen brings a change in demand. These are all the influences on buying plans except for the price of the god. To avoid confusion, then the price of the good changes and all other influences on buying plans remain the same, we say there has been a change in the quantity demanded.