Law of demand - Causes and effects table in A Level and IB Economics

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Created by: cfymikechen
Created on: 02-04-16 07:38

Law of demand

Causes

income effect
substitution effect
the law of diminishing marginal untility

Effects

as the price decreases, consumers will have more real income; thus, they will choose to purchase more, leading to a increase in demand
as a price of a good increase, consumer will choose to buy other substitutes due to lower prices
as we consume additional unit of something, the satisfaction derived from the consumption decreases. so consumers are willing to pay less

Overall summary

The law of demand states that as the price of a good increases, the quantity demanded of the good decreases. This explains why demand curve has a downward slope.

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