Chapter 2: Demand in a market Flashcards
Demand
The amount that consumers are willing and able to buy at each given price level.
Effective demand
Demand supported by the ability to pay for a good or service.
Market demand
Total demand in a market for a good, the sum or all individuals’ demands, at each given price.
Contractions in demand
Falls in the quantity demanded caused by a rise in price.
Extensions in demand
Increase in demand caused by changes (falls) in price.
Normal goods
Goods or services that will see an increase in demand when incomes rise.
Inferior goods
Goods or services that will see demand fall when incomes rise.
Composite demand
A good that is demanded for more than one purpose so that an increase in demand for one purpose reduces the availability of supply for the other purpose, typically leading to higher prices.
Derived demand
When the demand for one good or service comes from the demand for another good or service. The demand for cars stimulates the demand for steel; therefore the demand for steel is a derived demand.