1.2.2 Demand Flashcards
What is demand?
The quantity of a good or service that consumers are willing and able to buy at a given price in a given time
What factor cause a movement along the supply curve?
Price of the good
What factors cause a shift in the demand curve?
- price of other goods (complements and substitutes)
- income
- tastes and fashion
- govt legislation
Why is the demand curve downward sloping?
Because it is a negative correlation, when price increases, people demand less
What is a normal good?
A good where demand increases if consumer income rises
What has caused a shift to the right for this normal good and why?
The demand curve has shifted to the right because the good is a normal good, meaning if income has risen, the demand for said product also rises
What is an inferior good?
A good where demand increases when consumer income decreases
What has caused a shift to the left of this inferior good and why?
A rise in consumer incomes, demand has fallen because people are more willing and able to buy better, normal goods
What is a substitute good?
A good that when the price of one good increases, the demand for the substitute good also increases
What is a complement good?
A good that when the price of one good increases, the demand for the complement good decreases
What has caused a shift to the left for this substitute good?
A fall in price of a substitute good. The fall in price means consumers and more willing and able to buy the substitute good as it is cheaper, meaning a fall in demand for the good.
What has caused a shift to the right for this complement good?
A fall in the complement price item. If the price falls, then people are more willing and able to to buy that good driving up the demand for the complement good
What is the law of demand?
A law that states there is an inverse relationship between quantity demanded and the price of the good or service
What is diminishing marginal utility?
The concept that the individual gains less utility (benefit) from consuming the product
How does the diminishing marginal utility shape the demand curve?
Because the higher the price, the higher the diminishing marginal, the lower the demand