1.2.2: Demand Flashcards
What is demand?
Demand refers to the amount that consumers are willing and able to buy at any given price in a given period of time.
What causes a movement along the demand curve?
The change in price.
What is the relationship between demand and price?
An inverse relationship.
What is a contraction in demand?
When price increases and demand decreases.
What is an extension in demand?
When price decreases and demand increases.
What causes a shift in the demand curve?
A change in any of the conditions of demand.
Do changes in price cause a shift in the curve?
No.
What factors cause a shift in the demand curve (the conditions of demand)?
PIRATES
- Population (number of consumers)
- Income (changes in consumer income)
- Related goods (price of substitutes or complements)
- Advertising & consumer tastes (preferences)
- Taxes & subsidies (government policies)
- Expectations (future price or income changes)
- Seasonality (time of year affecting deman
As ________ increases, demand for ________ goods rises, while demand for ________ goods decrease.
Income, normal, inferior.
What is total utility?
The satisfaction derived from the overall consumption of a good.
What is marginal utility?
The change in utility derived from the consumption of the next unit of a good.
As you consume ________ goods, the rate of added utility of the extra goods usually ________.
More, decreases.
What does the Law of Diminishing Marginal Utility state?
The more units you use or consume, the less utility you derive from each additional unit consumed.
What is the relationship between total utility and quantity?
Inverse relationship.
