1.2.2 - demand Flashcards
What is demand?
The quantity of a good/service that an individual is willing and able to purchase at a given price.
What is effective demand?
Demand that is backed up by the ability to pay.
What is latent demand?
Demand that is not yet in the market as it is not backed up by the ability to pay.
What is derived demand?
Demand for a factor of production that is used to produce another good or service.
What is joint demand?
Demand for a product that is directly and positively related to the market demand of a related product.
What is composite demand?
Some goods have more than one use; if market demand for one product from this good increases, the market supply of the other will fall as resources are reallocated.
What does quantity demanded represent?
It represents how many of an item a consumer will purchase at a specific price, affected by price factors.
What does the law of demand state?
Demand and price are inversely proportional.
What is the income effect in relation to demand?
If the price of a product decreases, consumers have more real purchasing power, so they buy more, increasing quantity demanded.
What is the substitution effect in relation to demand?
If the price of a product decreases, consumers are more likely to switch to it, increasing quantity demanded.
What is the law of diminishing marginal utility?
Marginal benefit falls as quantity consumed increases, so consumers are willing to pay less for each successive unit assuming a rational individual spends to maximise utility and the consumption of all other goods remains constant (CP)
What is utility?
The happiness or satisfaction derived by an individual from a given good or service.
What is total utility?
The satisfaction gained by a customer as a result of their overall consumption of a good.
What is marginal utility?
The change in satisfaction resulting from the consumption of the next unit of a good.
What causes movements along the demand curve?
Changes in price cause movements along the demand curve.
What is a contraction of demand?
A contraction of demand occurs due to an increase in price.
What is an extension of demand?
An extension of demand occurs due to a decrease in price.
What causes shifts along the demand curve?
Changes in factors affecting demand, known as the conditions of demand, cause shifts along the demand curve.
How does a change in the price of substitutes affect demand?
A change in the price of substitutes can shift demand; for example, a lower price of a substitute can decrease demand for the original product.
How does a change in the price of complements affect demand?
A change in the price of complements can shift demand; for example, a lower price of a complement can increase demand for the related good.
How does a change in real income affect demand?
For some goods, an increase in income can lead to a fall in demand, and vice versa, depending on income elasticity of demand.
How does a change in the distribution of income affect demand?
A change in income distribution can shift demand, affecting how much different income groups purchase.
How does advertising and marketing affect demand?
Advertising and marketing can shift demand by influencing consumer preferences.
How do changes in interest rates affect demand?
Changes in interest rates affect how much is paid over time, influencing demand.
How does a change in population structure or age affect demand?
A change in the population structure or age can shift demand based on the needs and preferences of different demographic groups.
How do seasonal factors affect demand?
Seasonal factors cause demand to fluctuate depending on the time of year.
How do expectations of price changes affect demand?
Expectations of future price changes or shortages can cause demand to shift.
How does government legislation affect demand?
Government legislation, such as taxes or subsidies, can shift demand by altering prices or availability.
What does the demand curve show?
How many of an item a consumer is willing to buy, affected by non-price factors.
What is competitive demand?
Two or more goods that are close substitutes to another
What is market demand?
All consumer’s demands in the market summed together
