Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Economics 1.2 - How markets work > 1.2.2 - demand > Flashcards

1.2.2 - demand Flashcards

1
Q

What is effective demand?

A

Not just a want but a willingness and ability to buy a product.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is utility?

A

The satisfaction derived from the consumption of a good or service.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is marginal utility?

A

The additional utility derived from the last unit.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is diminishing marginal utility?

A

More of any good/service will increases total utility but the utility gained by the consumption of each additional unit will diminish.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What does the demand curve show?

A

How much will be bought at each and every price. It slopes downwards since consumers will only be tempted to buy more of a good/service if the price is lowered.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the law of demand?

A

It explains the inverse relationship between price and quantity demanded

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What causes a movement along the demand curve?

A

Changes in price.
Lowering price causes an extension in quantity demanded and increasing price causes a contraction in quantity demanded.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What factors of demand cause shifts in the demand curve?

A

T - trends
R - rate of interest
I - income
P - price of other goods (complements and substitutes)
A - advertising

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

How does the demand curve shift for increases and decreases in demand?

A

Increase in demand - shift to the right
Decrease in demand - shift to the left

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

How does rate of interest affect the demand curve?

A

Higher interest rates decrease consumer spending so demand curve shifts to the left

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

How does income affect the demand curve?

A

Higher real income shifts demand curve to the right for normal goods. For inferior goods, demand shifts to the left as consumers switch to better quality products.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What are substitutes?

A

Alternatives that satisfy a similar need/want.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

How does the price of substitutes affect the demand curve?

A

Decreased price of a substitute decreases demand (left shift) as consumers switch to a more affordable alternative.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are complements?

A

They are products that are often consumed together and are in joint demand.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

How does the price of complements affect the demand curve?

A

Decreased price of a complements increases demand (right shift) for the product

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

How does advertising affect the demand curve?

A

Positive advertising persuades consumers to buy more, shifting demand to the right.

17
Q

How does a successful advert affect the PED?

A

It makes the PED more inelastic. Positive perceptions facilitate brand loyalty making quantity demanded less responsive to changes in price since consumers are less sensitive.

18
Q

What is derived demand?

A

The demand for a commodity etc. which is a consequence of the demand for something else eg. labour

Economics 1.2 - How markets work (9 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions