Supply And Demand Assignment

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Conversely, the availability of closely complementary goods will tend to increase demand for an economic good, because the use of two goods together can be even more valuable to consumers than using them separately, like peanut butter and jelly.

Other factors such as future expectations, changes in background environmental conditions, or change in the actual or perceived quality of a good can change the demand curve, because they alter the pattern of consumer preferences for how the good can be used and how urgently it is needed.

For example, consider a castaway on a desert island who obtains a six pack of bottled, fresh water washed up on shore.

The first bottle will be used to satisfy the castaway's most urgently felt need, most likely drinking water to avoid dying of thirst.

Conversely, the lower price, the higher the demand.

Once the market reaches an equilibrium point, to which buyers and sellers form an agreement, houses are sold accordingly.

By adding up all the units of a good that consumers are willing to buy at any given price we can describe a market demand curve, which is always downward-sloping, like the one shown in the chart below.

Each point on the curve (A, B, C) reflects the quantity demanded (Q) at a given price (P).

Because they value each additional unit of the good less, they are willing to pay less for it.

So the more units of a good consumers buy, the less they are willing to pay in terms of the price.


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