demand Flashcards
demand
the quantity of a good or service consumers are
- willing to buy
- able to buy
- at a price
- over a given period of time.
-demand varies with price. generally, the lower the price, the more affordable the good and so consumer demand increases.
individual demand
the demand of one consumer
market demand
the total demand of all consumers
the law of demand
when goods are cheap, people buy more.
when goods are expensive, people buy less.
why demand changes?
-taste and fashion
-price of related goods
-income
-population
other factors
what are the ‘other factors’?
- weather
- expectations of future price changes
composite demand
demand for a good that has multiple different uses
joint demand
when an increase in demand for good x, causes consumers to demand more of good y.
e.g. dishwasher and dishwasher tablets
competitive demand
when the demand for one good, reduced the demand for another.
derived demand
when goods are demanded only because they are needed for the production of other goods.
law of demand
inverse relationship between price and quantity demanded
non-price factors
population advertising substitutes price income fashion and tastes interest rates complements price
population
a greater population= more demand for goods and services.
a decrease in population= less demand
advertising
good advertising will shift demand curve from d1 to d2, increasing demand from q1 to q2, regardless of price.
substitutes price
a rival good, or a good that is in competition with something else.
income
normal goods (luxury cars designer items) - as income rises demand for these goods increases, when income decreases demand will also decrease
inferior goods (fast food, public transport)- opposite relationship as income goes up demand for the products decreases, as income go down demand for them will increase
fashion/tastes
if fashion changes toward a certain good/service its gonna make us demand more of it at the same price, shifting demand curve to the right from d1 to d2.
interest rates
if interest rates go down it makes it cheaper to borrow which will increase demand for goods and services.
complements price
price of a complement can shift a demand for another good either to the left or right.
the relationship between price and quantity demanded using marginal utility theory
- marginal utility is the extra satisfaction derived from consuming one extra unit of the good.
- the demand curve is downward sloping because of diminishing marginal utility. the law of DMU suggests that consumer surplus generally declines with extra units consumed. this is because the extra unit generates less utility than the one already consumed. therefore, consumers are willing to pay less for extra units
