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To: Incorrigible

Because we all know it’s a fundamental law of economics that increasing the cost of something has no effect on the demand for that thing.


9 posted on 07/21/2014 9:41:22 AM PDT by circlecity
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To: circlecity
Because we all know it’s a fundamental law of economics that increasing the cost of something has no effect on the demand for that thing.

The fundamental law of economics (i.e. the Law of Demand) states that increasing the cost of something will decrease the QUANTITY DEMANDED of that good; however a change in price does NOT have any effect on the DEMAND for the good. Demand is the relationship between price and quantity demanded. In other words, Demand is the entire line -- or curve -- on the graph rather than just points on the curve. An increase or decrease in demand means the quantity demanded changes at every price. When you change the price, the curve does not shift; you just move to a different point on the curve. Thus, an increasing price does NOT have any effect on the demand for that thing, only an impact on the quantity demanded.

Things that have an effect on the demand for a good (i.e. Determinants of Demand) include:
Changes in Income and Wealth of buyers in the market,
Changes in price or availability of substitute goods,
Changes in price or availability of related goods,
Changes in the number of buyers in the market,
Changes in demographics and consumer tastes, etc.

Changes in these factors impact the quantity demanded at every price and therefore cause the entire demand curve to shift to the left (decrease) or right (increase).

This brief refesher from Basic Economics 101 is brought to you by the letter "D" (for Demand).

19 posted on 07/21/2014 10:13:08 AM PDT by VRWCmember
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