Does price affect demand?

Question

Does price affect demand, or QUANTITY demanded. My teacher told us that price never affects demand and I just want to be sure I have the concept down properly.

For instance if the price of a good increases, will the demand decrease, or quantity demanded?

Answer 1

The teacher is right, at least in simplified terms -- there is a distinction between "demand" and "quantity demanded". Look at a supply-demand chart with S & D curves, where the Y axis is price and the X axis is quantity. The D curve is an illustration of demand among a population. As you go up or down the D curve, each point shows what would be the quantity demanded (ie, the number that would actually be bought) at a given price, if the supplier is able to sell that many at that price.



As an example, people like iPods. Right now among the U.S. population there is a certain total desire among millions of people to get a new iPod. Some would pay more, some would only pay less, some only have so much money to spend. The D curve illustrates that total desire & ability to spend money on iPods.



That desire (demand) is what it is -- it doesn't change if Apple lowers the price by 20%. What DOES change is that some people who thought they couldn't afford the iPod they wanted, decide they can -- and so they buy one, so the total number that Apple could actually sell (quantity demanded) increases.

Answer 2

How Does Price Affect Demand

Answer 3

Price affects quantity demanded.

Answer 4

yes the price of goods and services does effect the demand for then.

The Price Elasticity of Demand (commonly known as just price elasticity or PED) measures the rate of response of quantity demanded due to a price change. or Ped measures the responsiveness of demand for a product following a change in its own price. The formula for the Price Elasticity of Demand (PEoD) is:

Elasticity of demand (Ped) = % change in demand of good X / % change in price of good X.

--If the PED is greater than one, the good is price elastic. Demand is responsive to a change in price. If for example a 15% fall in price leads to a 30% increase in quantity demanded, the price elasticity = 2.0

If the PED is less than one, the good is inelastic. Demand is not very responsive to changes in price. If for example a 20% increase in price leads to a 5% fall in quantity demanded, the price elasticity = 0.25

--If the PED is equal to one, the good has unit elasticity. The percentage change in quantity demanded is equal to the percentage change in price. Demand changes proportionately to a price change.

--If the PED is equal to zero, the good is perfectly inelastic. A change in price will have no influence on quantity demanded. The demand curve for such a product will be vertical.

--If the PED is infinity, the good is perfectly elastic. Any change in price will see quantity demanded fall to zero. This demand curve is associated with firms operating in perfectly competitive markets.

so it basically depend on if it is elastic or inelastic.xox

Answer 5

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In the short run: consumers will buy fewer new cars, drive fewer miles by cutting out unnecessary trips, and select cheaper substitutes, like used tires and retreads. This will cause an oversupply of tires, resulting in price reductions to maintain demand for tires in stock and in the supply chain. Tire manufacturers will decrease production and cut costs to meet the reduced demand. In the long run, consumers may sell their existing vehicles, requiring them or the buyer to replace worn tires. Consumers may purchase more fuel-efficient vehicles, increasing demand for new tires, particularly more efficient tires (lower rolling resistance). Some manufacturers may go out of business if they can't liquidate their current stock or don't lower production/costs based on lower market demand, decreasing the supply and potentially causing shortages, which may increase prices, reducing the quantity available on the market, allowing manufacturers to increase production to meet demand. It's up to you to determine how these factors shift the curves, or whether they are movements along the curves.