1.2 Flashcards
what does a demand curve show
the relation between price and quantity demanded
what is a normal good
if the price rises, demand will fall and vice versa
what is rational choice theory
the assumption that all individuals make logical decisions that will maximise their personal benefit
what does ‘ceteris paribus’ mean
means all other factors remain the same
what are the determinants of demand
-price of the good
-consumer income
-prices of other goods and services
- consumer tastes and fashion
-other factors e.g. advertising
what is a Veblen good
a special type of good identified where its demand increases as price increases
where did the term Veblen good come from
American Economist Thorstein Veblen identified a snob effect where people were happy to pay more for similar products
what is an inferior good
one where demand decreases as income increases
what are Giffen Goods
certain inferior products where demand rose as prices increase
how where Giffen goods discovered
Robert Giffen suggested that a rise in price of bread meant poor families couldn’t afford meat, and therefor spent more of their income on bread
what is a substitute product
an alternative product that creates competition, if the price of good A increases the demand for good B will increase
what is a complimentary product
a product that is bought along side a good or service, if the price of good A increases the demand for good B will decrease
what is consumer tastes
this relates to the trends at the time which often comes from advertising
what is derived demand
the demand for a factor of production that results from the for the product that it is used to make
