Market Demand 11/7/11

• The more aggregated we get, the flatter the demand curve gets
• If prices go up with wages at a similar rate, the change in demand will be minimal
• What changes consumption?
• Income
• Substitutes and relative convenience
• Expectations
• Tastes, individual preferences
• # of individuals in the market
• INCOME NOT PRICES IN ANALYZING ECONOMIC GROWTH
• What affects demand
• Income
• "Normal" - When income goes up, quantity demanded goes up
• "Inferior" - When incomes goes up, quantity demanded goes down
• Normal and inferior goods are subjective and relative