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economics: theme 1 > 1.2.2 - demand > Flashcards

1.2.2 - demand Flashcards

1
Q

What is demand?

A

The quantity of a good/service that an individual is willing and able to purchase at a given price.

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2
Q

What is effective demand?

A

Demand that is backed up by the ability to pay.

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3
Q

What is latent demand?

A

Demand that is not yet in the market as it is not backed up by the ability to pay.

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4
Q

What is derived demand?

A

Demand for a factor of production that is used to produce another good or service.

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5
Q

What is joint demand?

A

Demand for a product that is directly and positively related to the market demand of a related product.

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6
Q

What is composite demand?

A

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.

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7
Q

What does quantity demanded represent?

A

It represents how many of an item a consumer will purchase at a specific price, affected by price factors.

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8
Q

What does the law of demand state?

A

Demand and price are inversely proportional.

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9
Q

What is the income effect in relation to demand?

A

If the price of a product decreases, consumers have more real purchasing power, so they buy more, increasing quantity demanded.

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10
Q

What is the substitution effect in relation to demand?

A

If the price of a product decreases, consumers are more likely to switch to it, increasing quantity demanded.

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11
Q

What is the law of diminishing marginal utility?

A

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)

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12
Q

What is utility?

A

The happiness or satisfaction derived by an individual from a given good or service.

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13
Q

What is total utility?

A

The satisfaction gained by a customer as a result of their overall consumption of a good.

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14
Q

What is marginal utility?

A

The change in satisfaction resulting from the consumption of the next unit of a good.

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15
Q

What causes movements along the demand curve?

A

Changes in price cause movements along the demand curve.

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16
Q

What is a contraction of demand?

A

A contraction of demand occurs due to an increase in price.

17
Q

What is an extension of demand?

A

An extension of demand occurs due to a decrease in price.

18
Q

What causes shifts along the demand curve?

A

Changes in factors affecting demand, known as the conditions of demand, cause shifts along the demand curve.

19
Q

How does a change in the price of substitutes affect demand?

A

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.

20
Q

How does a change in the price of complements affect demand?

A

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.

21
Q

How does a change in real income affect demand?

A

For some goods, an increase in income can lead to a fall in demand, and vice versa, depending on income elasticity of demand.

22
Q

How does a change in the distribution of income affect demand?

A

A change in income distribution can shift demand, affecting how much different income groups purchase.

23
Q

How does advertising and marketing affect demand?

A

Advertising and marketing can shift demand by influencing consumer preferences.

24
Q

How do changes in interest rates affect demand?

A

Changes in interest rates affect how much is paid over time, influencing demand.

25
Q

How does a change in population structure or age affect demand?

A

A change in the population structure or age can shift demand based on the needs and preferences of different demographic groups.

26
Q

How do seasonal factors affect demand?

A

Seasonal factors cause demand to fluctuate depending on the time of year.

27
Q

How do expectations of price changes affect demand?

A

Expectations of future price changes or shortages can cause demand to shift.

28
Q

How does government legislation affect demand?

A

Government legislation, such as taxes or subsidies, can shift demand by altering prices or availability.

29
Q

What does the demand curve show?

A

How many of an item a consumer is willing to buy, affected by non-price factors.

30
Q

What is competitive demand?

A

Two or more goods that are close substitutes to another

31
Q

What is market demand?

A

All consumer’s demands in the market summed together

economics: theme 1 (7 decks)

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