1.2.1 Demand Flashcards
What is Demand?
The quantity of a good/service that consumers are willing and able to buy at a given price, at a particular time
What does a demand curve show?
Shows the relationship between price and quantity demanded.
At any given point along the curve it shows the quantity of the good or service that would be bought at a particular price..
What causes an extension in demand?
A decrease in price causes an extension in demand
What causes a contraction in demand?
An increase in price causes a contraction in demand.
What is a movement along the demand curve caused by?
A movement along the demand curve is caused by a change in price.
Note: Movement along the curve (one demand curve) caused by change in price
Shift in the demand curve (minimum of two curves) caused by change in any other factor
When does demand curve shift to the left?
Demand curve shifts to the left when there is a decrease in the amount demanded at every price
When does the demand curve shift to the right?
The demand curve shifts to the right when there is an increase in the amount demanded at every price
What factors lead to a change in demand?
- Substitutes –> Demand for a particular brand or product type can be affected by a price change of
a substitute
For example, If the cost of margarine increased by a huge amount, then demand
for butter would rise - Complementary Products –> These are products which are used together, e.g. printers and
cartridges, so if the price of printers were to increase, the demand
for printers might fall, and so the demand for ink cartridges might
fall too - Consumer Income –> A higher income can lead to an increase in demand for more expensive
products (Luxury Goods), whereas a fall in income can increase the demand
for cheaper goods and services (Inferior Goods) - Fashion, Consumer Tastes and Consumer Preferences –> Demand for a product relies on what
consumers want. - Advertising and Branding –> This aims to increase demand for a product, or encourage existing
consumers to be loyal to the product brand and repeatedly buy the
product, even when faced with a good substitute, to stop demand
falling - Demographics –> Changes in population can lead to changes in demand.
For example, advances in healthcare mean that, on average, people are living
longer. This has led to an increase in demand for goods and services for the
older generation - Seasonal Changes –> Demand for goods and services can change throughout the year.
For example, A cold winter often leads to an increase in demand for gas
used in central heating. A hot summer is likely to lead to an increase in
demand for fans and air conditioning units. - External Shocks –> For example, A risk of flooding may lead to an increase in demand for
sandbags as people try to protect their homes
What are Normal Goods?
Goods which people will demand more of if their income increases.
Note: This means that a rise in income causes the demand curve to shift to the right
- People want to buy more of a good at each price level
Examples: Mobile Phones
High-end Restaurants
Designer Clothes
what are Inferior Goods?
Goods which people demand less of if their income increases.
Note: This means that a rise in income causes demand curve to shift to the left
- People demand less at each price level since they’ll often switch
Example: Bus travel
‘Supermarket own brand’ goods
What is a Substitute Good?
Goods which are alternatives to each other
An increase in the price of one good will decrease the demand for it and increase the demand for its substitutes
Note: E.G. Beef and Lamb
Also known as ‘Competitive Demand’
Examples: Beef and Lamb
Coke and Pepsi
Tea and Coffee
McDonald’s and Burger King
What are Complementary Goods?
Goods that are often used together, so they’re in joint demand
Note: E.g. Strawberries and Cream
If the price of strawberries increases, demand for them will decrease along with demand for cream
Examples: Strawberries and Cream
Tennis ball and Tennis racket
Petrol and Cars
Console and Games
What is Derived Demand?
The demand for a good or a factor of production used in making another good or service
Note: For example, an increase in the demand for making fences will lead to an increased derived demand for wood.
What is Composite Demand?
Goods that have more than one use
Note: E.G. Oil can be used to make plastics or for fuel
This means changes in the demand curve for fuel could lead to changes in the supply curve for plastics.
