demand 1.2.2 Flashcards
P.A.S.I.C.F.I.C
Demand
The quantity of a good or service that consumers are willing and able to buy at a given price in a given time period
Demand has to be effective (consumers are willing AND able)
Demand has to be…
effective = consumers are willing AND able
Law of demand
There is an inverse relationship between price and quantity demand (QD)
As price increases QD decreases
As price decreases QD increases
(ceteris paribus)
non-price factors that shift the demand curve
P
**population **- if there is a greater population there would be more demand for a certain good or service
demand curve shifts to the right
non-price factors that shift the demand curve
a
advertising- affects our willingness to buy something
good advertising shifts demand curve to the right increasing demand from Q1 to Q2
non-price factors that shift the demand curve
s
**subsitutes price **- a rival good to something else
if the price of a subsitiute goes down, more poeople will be willing and able to buy therefore increasing demand of the sub good
non-price factors that shift the demand curve
i
income As consumer income changes, the demand for goods and services can shift.
Normal goods: Demand increases with rising income (e.g., luxury cars).
Inferior goods: Demand increases with falling income (e.g., generic brands).
non-price factors that shift the demand curve
F
**fashion and taste- **
non-price factors that shift the demand curve
IR
interest rates - as intrest rates increase, the ability for consumers to borrow loans to buy normal goods such as a house or cars, decreases because the cost of borrowing increases. therefore the demand curve shifts inwards
vice versa
non-price factors that shift the demand curve
c
complements price- a complementary good is something thats often bought with another eg pinter and ink (complement).
if the price of petrol increase the demand for petrol cars will shift to the left
