1.2.2 - Demand Flashcards
What Is Demand?
Ability and willingness to buy a particular good at a given price and at a given moment in time.
What Does It Mean When Demand Is Not Effective?
A consumer is willing to purchase a good but cannot afford to.
What Does It Mean When Demand Is Effective?
Consumer is willing and able to purchase the good.
What Is The Law Of Demand?
(2 Points)
~ There is an inverse relationship between price and quantity demanded.
~ As one increases, the other decreases.
What Is Meant By Ceteris Paribus?
All other things remain equal.
What Are Movements Along The Demand Curve Caused By?
A change in price.
What Happens In Terms Of Movements If Price Increases?
A contraction in demand.
What Happens In Terms Of Movements If Price Decreases?
A extension in demand.
Why Is The Demand Curve Downward Sloping?
(3 Points)
~ Income effect.
~ Substitution effect.
~ Diminishing marginal utility.
What Is The Income Effect?
As prices go up, purchasing power of incomes don’t go as far therefore are less able to buy do demand contracts.
What Is The Substitution Effect?
As prices go up other goods become more price competitive, so we switch our demand meaning demand for that good or service will contract.
What Are The Conditions Of Demand (PASIFIC)?
(7 Points)
~ Population.
~ Advertising.
~ Substitutes price.
~ Income.
~ Fashion / Tastes.
~ Interest rates.
~ Complement price.
What Happens When A Non-Price Factor Increases Demand?
Demand curve shifts right.
What Happens When A Non-Price Factor Decreases Demand?
Demand curve shifts left.
What Happens If Interest Rates Go Up?
More expensive to borrow.
