High attendance today. Looks like a few people have missed as much as they can get away with.Starting with a rehash of last week’s demand talk.
Law of demand again. Quantity demanded is inversely related to the price of what is being demanded. Demand is dependant on price, price is independant of quantity demanded.
Determinants of Demand –> Dx = Px Y Pr B T F Ep Ea
- Dx is “Demand for x”
- Px is “Price of a unit of x”
- Y is consumer’s income
- Pr is “Price of related goods (r)”
- B is number of buyers
- T is taste comsumers have for the product
- Ep is expectation of change in price
- Ea is expectation of changes in availability of good
- W is wealth of consumers
Types of Demand
- Price Demand — Inversely related to demand
- Income Demand — Directly related to demand for superior goods. Inversely related for inferior goods. What constitutes a superior or inferior good subject to change. Think ramen noodles vs eating out. People do not, past a certain point, eat more food as their income increases. However, they eat higher quality foods.
- Cross Demand — Prices of related goods. Some goods have no relationship between demands for them. Such goods are independant of each other. Demand between some goods is directly related to the price of other goods, i.e. bread and butter. Some goods have demand inversely related to the demand for particular other goods.