1) Demand - MMT Flashcards
Demand:
what is a market?
a market exists whenever buyers and sellers arrange to exchange goods or services for money
Key words: buyers and sellers exchange
Demand:
what is a “global market”?
- countries across the world
- bring together sellers/growers of avocados
- with buyers/consumers of the fruit
Demand:
what is demand?
- The amount of a product that consumers are willing and able to buy at a particular price over a given period of time
- Eg you might love to own a Ferrari but if you’re not able to afford one you’re not part of the demand for this product
Demand:
what is price?
-the amount of money a business receives for selling an individual good or service.
Demand:
what is cost?
what a business pays out for rescources or materials
Demand:
what is quantity demanded?
- the total amount of a good of service that consumers demand over a given period of time
- it’s specific eg £1.50 per pizza slice the canteen sell 100 per day
Demand:
what is individual demand?
the quantity of a good or service demanded by one individual at different prices, given income and other prices
- identifying individual preferences
eg at a price of £1.50 per pizza slice I will buy 2 a week but you might buy 5. However if the price was £1, I would buy 3 per week but you might buy 8
Demand:
what is market demand?
- the market demand function represents the total quantity of a good demanded by all individuals at each price
- it is the sun of individual demand curves for a particular good or service
- (assuming the market is Hanley Castle students and staff) the market demand curve shows how many pizzas the canteen will sell at different prices
- (normally bigger)
Demand:
what is price thought to be inversely linked to?
quantity demanded
- If the price of a product increases then you would (normally) expect the quantity of the product demanded to fall
- Similarly, a lower price would hopefully leas to an increase in quantity demanded
Demand:
what are the 2 reasons we buy more at lower prices?
- the income effect
- the substitution effect
Demand:
what is the income effect?
lower prices increase our purchasing power
Demand:
what is the substitution effect?
consumers perceive lower priced goods to be better value relative to goods whose prices haven’t changed, therefore they “substitute” (replace) the expensive goods with the cheaper
Demand:
what is the law of demand?
The Law Of Demand, states that if all other factors remain equal, the higher the price of a good, the less people demand that good
Demand:
what does the demand curve for a product show?
the relationship between price and quantity demanded for that product over a range of different prices
Demand:
what is the shape of a demand curve?
- demand curves nearly always slope downwards from left to right, indicating an inverse relationship between price and quantity demanded
- price increases lead to lower quantity demanded and vice versa
Demand:
when the demand curve goes down, it “…”
extends
Demand:
what’s contraction/ contracting?
eg if the price went above £2 ( the maximum) we would expect the demand curve to go further back towards the P axis
Demand:
a change in price leads to…
a movement ALONG the demand curve
Demand:
what is “cesteris paribus”
assuming that “everything else remains equal”
Demand:
what is the relationship between price and quantity demanded?
inverse
Demand:
what leads to an extension in the D curve?
the lower the price the more will be demanded, this leads to an extension in the D curve
Demand:
what are the 3 determinants of demand?
1) a change in income
2) a change in the price of other goods
3) tastes and fashions may have changed
Demand:
what is an example of a change in income?
(pizza slices example), parents may be struggling with the cost of living so insist children have packed lunches instead
Demand:
what is an example of a change in the price of other goods?
1) either the price of substitute goods (eg chicken nuggets) has gone down
2) or the price of complementary goods (eg ketchup) has gone up
Demand:
what is an example of tastes and fashions changing?
(pizza slices example), the government may have publicised a link between excessive pizza consumption and diabetes
Demand:
a decrease in levels of demand will shift D to the…
left
Demand:
an increased levels of demand shift D to the…
right
Demand:
what is RDI?
Real Disposable Income, (Real takes into account inflation)
Demand:
what is derived demand?
this occurs when a good or factor of production such as labour is demanded for another reason
-> (demand resulted from demand for an intermediate good or service
Demand:
what is composite demand?
a good which is demanded for multiple different uses
Demand:
what is joint demand?
goods bought together eg printer and ink
Supply/Demand:
what is equilibrium price?
Defined as the price at which demand =supply and where the price will settle, until such time as there is a change in either the conditions of demand or of supply.
Demand:
what do you do if you have excess demand?
there is a waste of potential profits, the price is too low so increase the price
Supply/Demand:
how is price determined?
by the interaction of demand and supply
Supply/Demand:
if the price is above equilibrium there is excess…; below equilibrium is excess…
supply…demand
Supply/Demand:
excess supply brings the price…; excess demand brings the price…
down…up
Supply/Demand:
in economics any given market is only… when supply equals demand, which is where the two curves cross
‘at rest’ (in equilibrium)
