1.3.1 Demand Flashcards
What is effective demand
The quantity that consumers are willing to buy at the current market price
What is Individual demand
The demand of an individual/ firm, measured by the quantity bought at a certain price at one point in time
What is market demand
The sum of all individual demands in a market
How does demand vary
With price
What is a contraction in demand
When at a higher price, lower quantities is demanded
What is an expansion of demand
When there’s lower prices so a larger quantity is demanded
What are the factors that shift the demand curve ( there’s 7)
PIRATES - population, income, related goods, advertising, tastes &fashions, expectations, seasons
How does the population affect demand
The larger the population, the higher the demand
How does income affect demand
If consumers have more disposable income, they are able to afford more goods
How does related goods (substitutes/ complements) affect demand
If the price of the substitute falls, the quantity demanded of the original good will fall because consumers would switch to the cheaper alternative
How does advertising affect demand
Would increase consumer loyalty to the good & increase demand
How does tastes & fashions affect demand
Demand curve would shift if consumers tastes change
E.g. the demand for physical books might fall, if consumers start preferring to read e-books
How does expectations affect demand
If speculators expect the price of shares in a company to increase in the future, demand is likely to increase in the present
How does seasons affect demand
Demand changes according to seasons
E.g. during summer, the demand for ice cream & sun lotions increases
What does it mean by an inward shift in demand
Lower quantities of goods is demanded
What does it mean by an outward shift in demand
More goods are demanded
