Chapter 3 Flashcards
What is ceteris paribus
A phase means all other things being equal, we only focus on 1 variable as others are constant
What is joint demand
Joint demand is for goods that are interdependent, such as they are demanded together. E.g. a knife and fork
What is composite demand
Demand for a good that has multiple uses, such as flour
What is competitive demand
Competitive demand is demand for a good that is in competition for another such as an iPhone vs a Samsung
Factors that shift demand
Advertising, changes in income, population size, tastes and fashion, prices of other goods (complementary and substitute), legislation
Law of demand
A law that states there is an inverse relationship between quantity demanded and the price of a good or service, ceteris paribus
What is a normal good
A normal good is where the quantity demanded increases in response to an increase in consumer incomes. Also just a normal good like dairy milk chocolate etc
What is an inferior good
A good where the quantity demanded decreases in response to an increase in consumer incomes. This for example is the supermarket’s own brand of chocolate (the cheapest type of a product)
What is a luxury good
A good where the quantity demanded increases when consumer incomes increase. An example of this is a luxury holiday
What are substitute goods
A good that has close competitors, such as coke and Pepsi.
What are complement goods
two goods that are jointly consumed
What is demand
Demand is the quantity of a good or service that consumers are willing and able to buy at a given price during a given period of time. Demand varies with price
What is marginal utility
Marginal utility is the extra satisfaction gained from consuming one extra unit of the good
What shift demand
PIRATES
Population
Income
Related goods - complements and substitutes
Advertising
Tastes and fashion
Expectations
Seasons
