1.2.2 Demand 📉✅ Flashcards
What are the factors that determine purchase?
Price, income, price of alternatives and individual preference.
What type of relationship is price and demand? And what is the law called?
Inverse. Law of demand.
Define effective demand?
Desire that is also backed by the ability for consumers to buy a good or service.
What is the difference between wants and demand?
Wants are what you desire demands are backed by money.
What does it mean when there is an inward or outward shift in a demand curve?
Either there is less or more demand in the market.
What does not shift a demand curve? What does it do instead?
Change in price :)
Name the conditions of demand and what do they do?
- real incomes
- size/age distribution of the population
- taste and fashion preferences
- price of substitutes or complements
- amount of advertisement
- interest rates
They cause shifts in the demand curve.
What is demand?
Demand is amount of goods and services a consumer is willing to purchase at a given price.
What is not effective demand?
When a consumer is willing to purchase but can not afford to.
What is the difference between a movement along the demand curve and a shift in it?
When price changes (ceteris paribus), there is a movement along the demand curve resulting in a change to quantity demanded. When a condition of demand changes, there is a shift of the entire demand curve resulting in a change to demand.
Explain the ‘snob effect”?
People who gain value from other noticing they are rich enough to afford an item. (DEMAND PRICE RELATIONSHIP IS A POSITIVE CORRELATION FOR THE GOOD)
What happens to normal good demands as prices increase?
Demand increases
What happens to inferior goods demand when income rises?
Demand falls.
Define diminishing marginal utility?
The extra benefit gained from consumption of a good generally declines as extra units are consumed.
What does diminishing marginal utility explain?
Why demand slopes are downward sloping.
