2.2 Demand Flashcards
The role of markets
What is demand?
The quantities of a product that buyers are willing and able to buy at various prices per period of time, other things remaining the same
What is notional demand?
Wanting something but not being able to actually get it
What is effective demand?
Wanting something and actually being able to get it
What is individual demand?
The sum of the demand of a single consumer
What is market demand?
The sum of the demand by every consumer in a market
What is the relationship between price and quantity demanded?
Inverse relationship. As the price of the product increases, the demand decrease. As the price decreases, the demand increases IN CETERIS PARIBUS!
When would contraction occur on a demand curve?
When price increases so there will be movement up the demand curve
When would expansion occur on a demand curve?
When price decreases so there will be movement down the demand curve
What happens when the demand curve contracts?
Movement up the demand curve
What happens when the demand curve expands?
Movement down the demand curve
What are the three different types of demand and what do they each mean?
- Joint demand: two or more goods/services are used together e.g. toothbrushes and toothpaste
- Composite demand: goods are demanded for different purposes e.g. milk can be used for yoghurt, cheese etc.
- Competitive demand: a good is purchased as an alternative to another good (substitute good) e.g. beef and pork
What factors (determinants) influence demand for goods? aka shift the demand curve
- Consumer income
- Prices of other products
- Consumer preferences and other cinluences (time
- Price of the actual product itself
What is disposable income?
Income that still includes inflation
What is real disposable income?
Income with inflation taken off
What is a normal good?
Goods where an increase in income leads to an increase in demand e.g. a holiday
What is an inferior good?
Goods where an increase in income leads to a fall in demand e.g. the use of public transport
How would the graph show a shifted increase in demand?
If the demand curve line moves to the right
How would the graph show a shifted decrease in demand?
If the demand curve line moves to the left
What are substitute goods?
Goods that compete with one another e.g. beef and pork
What are complementary goods?
Goods for which there is joint demand, people consume them together e.g. toothbrushes and toothpaste
How would the increase in the price of tea on the demand for coffee change the demand curve?
The demand for coffee will increase because tea is then more expensive than coffee (susbtitute goods) so the demand curve will shift to the right
How would the increase in the price of tea on the demand for milk change the demand curve?
The demand for milk will decrease because tea will be more expensive to make (complementary goods) so the demand curve will shift to the left
