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Economics Demand Essay

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Demand is the quantity of goods and services that consumers are willing and able to purchase at various price levels. Even though the focus in economics is on the relationship between the price of a product and how much consumers are willing and able to buy, it is also important to examine all of the factors that affect the demand for a good or service.

The first factor which can cause an increase in demand is the rise in prices of other goods and services. Individual and market demand are affected by the price of the good or service being offered. The law of demand shows that there is an inverse relationship between price and demand. An increase in one will cause a decrease in the other. An increase in the price of substitute goods would cause consumers to demand more for the good. For example, if the price of thongs and sandals increase more people would be willing to buy shoes because the price of the shoes remained the same. If the price of the complementary good increases, the demand for the good will also decrease while a fall in the price of a complementary good may also increase demand. In this case, shoe prices would influence demand for complements such as shoe laces shoe polish.
The second factor which affects the market demand is the expected future prices. If consumers expect the price of a certain good will increase in the near future, they will bring forward their consumption and increase the current demand for the product. While a decrease in demand would cause an expected decline in the price of the product in the future. For example an increase in demand would make consumers expect that the price of new shoes will increase because of the applying of a new government tax, they will bring forward their purchases and increase the current demand for new shoes. While the decline in the price of the product in the future is caused due to lower tax on shoes.

The third factor which has been affecting the market demand is the change in consumer...

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