Demand Flashcards
1
Q
What is demand
A
Demand is the number of people who are likely to buy a certain good or service, seeking to satisfy their needs and wants
2
Q
What does the law of demand state
A
There is an inverse relationship between price and quantity demanded
3
Q
What affects the demand of a good or service for a consumer
A
- Substitution effect - changes in price motivate consumers to buy relatively cheaper substitute goods
- Income effect - changes in price affect the purchasing power of consumers’ income
- Law of diminishing marginal utility - as you continue to consume product, you will eventually get less additional satisfaction from each unit you consume
4
Q
What are the five shifters of demand
A
- Tastes/preferences
- Number of consumers
- Price of related goods
- Income
- Expectations
5
Q
normal goods
A
Income and demand for product are directly related
6
Q
Inferior goods
A
Income and demand for product are inversely related
7
Q
What happens to the demand for a product when the price increases
A
Demand stays the same but the quantity demanded increases
8
Q
What causes movement along a curve
A
Changes in price affect the quantity demanded and the quantity supplied
9
Q
What causes an entire curve to move
A
The five shifters
