1.2.1 Demand Flashcards
Demand
The amount of a product that consumers are willing to buy at any given price
Factors that affect demand
PPMISSED
1) Preferences
2) Price of complementary goods
2) Marketing
3) Income of consumers
4) Substitutes
5) Seasonality
6) External factors
7) Demograhics
How does tastes/preferecnes affect demand
Tastes and preferences are always changing meaning demand for products/service will increase/decrease over time
How does price of complementary goods affect demand
Sometimes products are brought together e.g cornflakes and milk
- if price of cornflakes falls then demand of milk will increase
How does marketing/advertising affect demand
If there is a successful advertising campaign the demand for some products will increase
How does income of consumer affect demand
Increased income mean increased demand for normal goods
increased income means decreased demand for inferior goods
How does subsitututes affect demand
E.g own value brands
if there is a cheaper substitute e.g supermarket own brand version , it will affect demand of the branded item
How does seasonality affect demand
at differnent times of the year demand is high for certain products e.g christmas goods - christmas trees - demand is high during Nov/Dec times
External factors
How do these affect demand
Factors beyond the control of a business
competiton , social environment , goverment policy e.g tax/regulation all effect demand
Complementary goods
A good that is in conjunction with another good/service
-when the price of a particular good rises the demand for it’s complement drops because consumers are unlikely to use the complement alone
Substitute good
Similar to another product they wanted.
-they can satisfy/partially satisfy the same needs of a consumer
Normal good
A good for which demand increases when income rises and vice versa.
e.g eating out , clothing , holidays
Inferior goods
A good for which demand decreases when consumer income rises and vice versa
e.g bus transport, frozen dinners
Luxury goods
Products that are not essential but are highly desired
On the diagram when demand increases demand shifs for left to where
Demand shifts from left to right
d to d2
