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MICROECONOMICS > 1.3 Nature Of Demand > Flashcards

1.3 Nature Of Demand Flashcards

1
Q

Define demand

A

quantity of A good or service consumers are WILLING AND ABLE to buy

  • at any possible price
  • in a given period
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2
Q

What is the difference between individual and market demand?

A

Individual refers to an individual consumer (demand def. ) whereas market relates to ALL consumers in a market. (the demand def. refers to market demand)

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3
Q

Define derived demand

A

Demand for a FOP or a good which DOESNT DERIVE from the factor or the good itself but from the goods it produces.

E.g. steel, machinery/ labour

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4
Q

Define joint demand

A

Demand for goods which are INTERdependant so they are demanded together

E.g. fish and chips
strawberries and cream
printer and print cartridges

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5
Q

Composite demand

A

Demand for a good that has multiple uses e.g. water

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6
Q

Competitive demand

A

Demand for goods that are in COMPETITION with each other

e.g. beef vs pork

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7
Q

What does the Latin phrase ‘ceteris parabis’ mean?

A

Means “other things being equal”. Used to focus on changes in one variable while holding other influences constant.

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8
Q

How is the demand for DVDs influenced by price?

A

Assuming ceteris paribus you would expect demand to be high when price is low and vice versa. (AKA law of demand)

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9
Q

Define the law of demand

A

States there is an inverse relationship between quantity demanded and price of a good service, ceteris paribus

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10
Q

What is a demand curve?

A

Graph showing how much of a good is demanded at any given price.

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11
Q

What is the relationship of the demand curve?

A

Inverse relationship. Demand curve slopes downward.

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12
Q

Why is the demand curve downward sloping?

A
  • Real income effect - as price increases less income is left over
  • Substitution effect - finding other goods more attractive that are cheaper
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13
Q

What causes a MOVEMENT along the demand curve?

A

Consumers responding to price change

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14
Q

Could a demand curve ever slope upward?

A

Yes, arguably due to “snob effects”. Some people may value certain goods more because their price is high eg Rolex watches

(Conspicuous consumption effect
Gary V- people gain value from having other people notice they are rich enough to afford to consume a particular food)

Doesn’t work for whole markets/ No evidence for it.

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15
Q

What causes a shift in the demand curve?

A
  • Consumer incomes
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16
Q

Define a normal good

A

Increased income means demand for the good increases

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17
Q

Define an inferior good

A

When consumer incomes increase demand decreases

18
Q

Define demand

A

quantity of A good or service consumers are WILLING AND ABLE to buy

  • at any possible price
  • in a given period
19
Q

What is the difference between individual and market demand?

A

Individual refers to an individual consumer (demand def. ) whereas market relates to ALL consumers in a market. (the demand def. refers to market demand)

20
Q

Define derived demand

A

Demand for a FOP or a good which DOESNT DERIVE from the factor or the good itself but from the goods it produces.

E.g. steel, machinery/ labour

21
Q

Define joint demand

A

Demand for goods which are INTERdependant so they are demanded together

E.g. fish and chips
strawberries and cream
printer and print cartridges

22
Q

Composite demand

A

Demand for a good that has multiple uses e.g. water

23
Q

Competitive demand

A

Demand for goods that are in COMPETITION with each other

e.g. beef vs pork

24
Q

What does the Latin phrase ‘ceteris parabis’ mean?

A

Means “other things being equal”. Used to focus on changes in one variable while holding other influences constant.

25
Q

How is the demand for DVDs influenced by price?

A

Assuming ceteris paribus you would expect demand to be high when price is low and vice versa. (AKA law of demand)

26
Q

Define the law of demand

A

States there is an inverse relationship between quantity demanded and price of a good service, ceteris paribus

27
Q

What is a demand curve?

A

Graph showing how much of a good is demanded at any given price.

28
Q

What is the relationship of the demand curve?

A

Inverse relationship. Demand curve slopes downward.

29
Q

Why is the demand curve downward sloping?

A
  • Real income effect - as price increases less income is left over
  • Substitution effect - finding other goods more attractive that are cheaper
30
Q

What causes a MOVEMENT along the demand curve?

A

Consumers responding to price change

31
Q

Could a demand curve ever slope upward?

A

Yes, arguably due to “snob effects”. Some people may value certain goods more because their price is high eg Rolex watches

(Conspicuous consumption effect
Gary V- people gain value from having other people notice they are rich enough to afford to consume a particular food)

Doesn’t work for whole markets/ No evidence for it.

32
Q

What causes a shift in the demand curve?

A
  • Consumer incomes
  • Price of other goods (substitutes and complements)
  • Consumer preferences
  • Time period over which demand is being considered
  • Population size
33
Q

Define a normal good

A

Increased income means demand for the good increases

34
Q

Define an inferior good

A

When consumer incomes increase demand decreases

35
Q

Draw a diagram to show demand for foreign holidays after an increase in consumer incomes

A

Pg. 29

36
Q

Draw a diagram to show demand for bus journeys after an increase in consumer incomes

A

Pg. 29

37
Q

Define substitute goods

A

When consumers see two goods as alternatives. Demand for a good is likely to rise if the price of the other food rises.

38
Q

Define complement goods

A

When people consume two goods jointly so an increase in price of one good causes demand for the other good to fall.

39
Q

What is a fall in demand known as?

A

Contraction in demand

40
Q

What is an increase in demand known as?

A

An extension in demand

41
Q

What is a consumer surplus?

A

Difference between amount a buyer would be prepared to pay and amount actually paid

42
Q

How is consumer surplus shown on a graph?

A

Triangle / rectangle above price level underneath demand curve

MICROECONOMICS (6 decks)

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