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Economics Theme 1 > 1.2.2 > Flashcards

1.2.2 Flashcards

1
Q

What is demand?

A

The quantity of a good or service that consumers are willing and able to buy at a given price in a given time period.

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2
Q

What is effective demand?

A

When a desire to buy a product is backed up by an ability to pay.

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3
Q

What is derived demand?

A

The demand for a factor of production used to produce another good or service.

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4
Q

What does the demand curve show?

A

The inverse relationship between the price of an item and the quantity demanded over a period of time

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5
Q

What are the two reasons as for why more is demanded as price falls?

A

-The income effect
-The substitution effect

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6
Q

What is the income effect?

A

When the price of a good falls, the consumer can maintain the same consumption for less expenditure, this increases “real income”

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7
Q

What is the substitution effect?

A

When the price of a good falls, ceteris paribus, the product is now relatively cheaper than an alternative and some consumers will switch their spending from the alternative good or service.

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8
Q

What is the law of Diminishing Marginal Utility?

A

The satisfaction derived from the consumption of an additional unit of a good will decrease as more of a good is consumed, assuming the consumption of all other goods remain constant.

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9
Q

The conditions of demand are the factors that cause?

A

The demand curve to shift

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10
Q

A shift to the right on the demand curve shows what?

A

Increase in demand

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11
Q

A shift to the left on the demand curve shows what?

A

Decrease in demand

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12
Q

What are the factors that influence the conditions of demand?

A

-Population
-Income
-Related goods
-Advertising
-Taste/fashion
-Expectations
-Seasons
-Government legislation

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13
Q

How does population influence the conditions of demand?

A

If populations rises, demand for all products increases so the demand curve shifts to the right.

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14
Q

How does income influence the conditions of demand?

A

income increases, demand increases as they can afford to buy more of the product.
Fall in income, demand decreases and shifts to the left.

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15
Q

How do related goods influence the conditions of demand?

A

If goods are complements or substitutes of each other then a change in price of another good can cause a shift in the demand curve.

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16
Q

How does advertising influence the conditions of demand?

A

If a firm carries out successful advertising, demand is likely to increase.
If a competitor firms has a successful advert demand for the first firm will fall.

17
Q

How does taster/fashion influence the conditions of demand?

A

If something becomes more fashionable, we expect demand to increase and if it becomes less fashionable, then demand falls.

18
Q

How do expectations influence the conditions of demand?

A

Expectations of what might happen in the future.
If we expect a shortage or price rise then demand increases.
If we expect a price fall demand decreases.

19
Q

How do seasons influence the conditions of demand?

A

Some products will find their demand is affected by the weather.
Summer, demand for sun cream increases.

20
Q

How does government legislation influence the conditions of demand?

A

Affects demands for goods.
Demand for car seats after it became legal requirement

21
Q

What is joint demand?

A

When demand for one product is positively related to demand for a related good or service.

22
Q

What are examples of joint demand?

A

Fish and chips
apps for smartphones

23
Q

What is composite demand?

A

Exists where goods have more than one use, and so an increase in the demand for one product leads to a fall in supply of the other?

24
Q

What are examples of composite demand?

A

Milk which can be made for cheese, butter.

25
Q

What does the law of demand state?

A

Higher price leads to lower demand

26
Q

What is a veblen good?

A

As price rises people think it is more expensive it must be better quality.

27
Q

How does a veblen good influence the demand curve?

A

Shifts to the right

28
Q

What is a Griffen good?

A

Occurs when a rise in price causes higher demand because the income effect outweighs the substitution effect.

Economics Theme 1 (22 decks)

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