1 - Demand Flashcards
What is scarcity?
Unlimited wants, but limited resources.
What is resource allocation?
process which available resources are distributed and utilized to produce goods and services.
Objectives of the 3 economic agents (Consumer, producer, government)
Consumer: Maximise utility
Producer: Maximise profit
Government: Maximise social welfare
Define ‘rationality’
Maximising utility, profit, social welfare.
Define ‘demand’
The quantity of a good and service that consumers are willing and able to buy at any price in a given time period.
Define ‘ceteris paribus’
Other factors being equal
Define ‘market’
Any place where buyers and sellers meet to exchange goods and services.
Define ‘Law of demand’
States that an inverse relationship between price and quantity demanded of a good or service.
Define ‘vablen good’
Good that demand increases as price increases due to its exclusive nature and appeal as a status symbol.
What are the factors/conditions of demand?
Price of other substitutes
Income changes
Trend, fashion
Advertising and branding
Population change in size and distribution
Define ‘normal good’
Good which quantity demanded increases as income increases.
Define ‘inferior good’
Quantity demanded decreases as income increases.
Define ‘giffen good’
Demand increases as price increase due to its inferior nature with the lack of substitutes
Define ‘Substitute good’
Goods consumers regard as alternative
Define ‘complement goods’
Goods that consumers consume jointly.
