Chapter 4 is focusing on demand, demand is a microeconomic concept. Microeconomics is the part of economic theory that deals with behavior and decision making by individual units, for example, people and firms. The definition for demand is the desire, ability, and willingness to buy a product that can compete with others who have similar demands. Demand is essential to the process for market economy that deals with the three basic questions: What, How, and For Whom to produce. The concept of demand consist of two variables- the price and quantity of a specific product at a given point in time. To see how an economists would analyze demand, you would use a demand schedule. A demand schedule shows the various quantities demanded of a particular …show more content…
When the price of a product drops consumers pay less and the consumers are left with extra income. If the price of a product went up the consumer would probably be left with little to no income left over. This can be used as an example to describe the income effect. The income effect is the overall change in quantity demand for that product because of a change in price that alters consumers’ real income. The substitution effect is the change quantity demand because of the change in the relative price of the product. Whenever a price change causes a change in quantity demand, the change appears in the graph alongside the demand curve. If other factors change but the price of a product remains untouched this will cause the consumers to buy different amounts of the product at the same price. This scenario is known as change in demand, a change in demand happens when the entire demand curve shifts either to the right( which shows an increase in demand) or to the left(which shows a decrease in demand). If there is a change in demand, a whole new demand curve would be the result of this, but if a change in quantity demand occurred a movement along the original demand curve would be the