2.2 Demand Flashcards
What is a market?
Where buyers and sellers meet.
What is a sub-market?
Is part of an overall market, but it has it’s unique characteristics. For example in banking each sub-market could be credit cards, loans etc.
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 period of time.
What is Derived Demand?
Demand for a factor of production or good which derives not from the factor or good itself but from the goods it produces.
What is an example of Derived Demand?
Greater demand for buying coffee leads to greater demand for baristas
What is Joint Demand?
Demand for goods that are interdependent, such that they are demanded together (complementary goods may be in joint demand).
What is Competitive Demand?
Demand for goods which are in competition with each other (substitutes)
What two effects are witnessed when the price of a good rises?
Income effect and Substitution effect
What is the Substitution effect?
An increase in the price of a good will encourage consumers to buy alternative goods. The substitution effect measures how much the higher price encourages consumers to use other goods, assuming the same level of income.
What is the Income effect?
How the price change effects consumer income. If price rises, it effectively cuts disposable income and there will be lower demand.
What is an expansion?
Movements along the demand/supply curve resulting in an increase in demand/supply.
What is a contraction?
Movements along the demand/supply curve resulting in a decrease in demand/supply.
What are the factors that can shift demand?
Population
Advertising
Substitutes
Income
Fashion and trends
Interest rates
Complementary goods
What does demand have to be in economics?
Demand has to be effective. Consumers have to be willing and able for demand to exist.
What is the law of demand?
There is an inverse relationship between price and quantity demanded. As price increases, Qd decreases and vice versa.
