In general, an expectation of falling prices in the near future leads to current reductions in quantity demanded at every price, as shown in the graph to the right. The size of this effect depends on a number of things, but the direction can only be one way.

   One important point to note is that we are not discussing the demand for investment goods such as stocks, bonds, or other investment items. The effect of expectations on demand for such goods, is a good deal more complex. At this point, we are simply considering the effect of changing expectations on the demand for goods purchased because their consumption or ownership brings pleasure or "utility."

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