when there are fewer substitutes demand tends to be?
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Over longer periods of time demand tends to be more elastic. The greater availability of close substitutes of a good the better able consumers are to respond to a price change by altering their quantity demanded. With fewer substitutes demand tends to be less elastic.
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In microeconomics, the law of demand states that, "conditional on all else being equal, as the price of a good increases (↑), quantity demanded decreases (↓); conversely, as the price of a good decreases (↓), quantity demanded increases (↑)".
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Effective demand. In economics, effective demand (ED) in a market is the demand for a product or service which occurs when purchasers are constrained in a different market. It contrasts with notional demand, which is the demand that occurs when purchasers are not constrained in any other market.
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Many factors determine the demand elasticity for a product, including price levels, the type of product or service, income levels, and the availability of any potential substitutes. High-priced products often are highly elastic because, if prices fall, consumers are likely to buy at a lower price.
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Necessities tend to have inelastic demand. Luxuries tend to have elastic demand. Demand is elastic when there are close substitutes. Elasticity is greater when the market is defined more narrowly: food vs.
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If two products are complements, an increase in demand for one is accompanied by an increase in the quantity demanded of the other. For example, an increase in demand for cars will lead to an increase in demand for fuel. ... Conversely, the demand for a substitute good falls when the price of another good is decreased.
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Key Takeaways Many factors determine the demand elasticity for a product, including price levels, the type of product or service, income levels, and the availability of any potential substitutes. High-priced products often are highly elastic because, if prices fall, consumers are likely to buy at a lower price.
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A good will have a more elastic demand the greater the availability of close substitutes Demand is said to have unit elasticity if elasticity is equal to 1.
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Fewer jobs in the City eventually resulted in fewer people able to live there. This means there are now more houses than people who want them, so the law of supply-and-demand drives prices down. ... In an area with low demand, the repairs make no economic sense, since they cost more than the house is worth.
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Because marginal utility diminishes as the quantity of a good is consumed increases (the law of diminishing marginal utility), buyers are willing and able to pay lower prices for larger quantities (the law of demand). Hence, the law of demand exists because the less satisfaction is received for larger quantities.
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The other half of the scarcity problem is limited resources. Unlimited wants and needs essentially means that people never get enough, that there is always something else that they would like to have.
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The law of diminishing marginal utility states that marginal utility declines as consumption increases. Because demand price depends on the marginal utility obtained from a good, price also declines as consumption increases, meaning price and quantity demanded are inversely related, which is the law of demand.
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Once you raise the price of your product, your product's quantity demanded will drop until equilibrium is reached. Therefore, shortage drives price up. If a surplus exist, price must fall in order to entice additional quantity demanded and reduce quantity supplied until the surplus is eliminated.
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Usually, marginal substitution is diminishing, meaning a consumer chooses the substitute in place of another good rather than simultaneously consuming more. The law of diminishing marginal rates of substitution states that MRS decreases as one moves down a standard convex-shaped curve, which is the indifference curve.
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A decrease in demand and an increase in supply will cause a fall in equilibrium price, but the effect on equilibrium quantity cannot be determined. 1. For any quantity, consumers now place a lower value on the good, and producers are willing to accept a lower price; therefore, price will fall.
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The slope of the indifference curve is called the marginal rate of substitution , which declines as the quantity of X increases relative to the quantity of Y. Of course, the amounts of commodities X and Y that the individual will be able to consume depends on the level of that person's income.
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as the price of a product increases, quantity demanded lowers; likewise, as the price of a product decreases, quantity demanded increases. A shift in demand is represented by a new line. ... When the price of one falls, the demand for the other increases (and conversely).