Demand Flashcards
demand
the quantity of a good or service commidty consumers are willing and able to buy at a particular price, at a particular time; ceteris paribus.
effective demand
demand is made effective only when a consumer’s willingness or desire to purchase a good or service is backed by income, giving them the ability to purchase the good or service.
demand schedule
a table showing the price of a good and the quantity demanded at each price.
what does a demand curve show?
shows the relationship between price and quantity demand of a given good or service.
shape of demand curve
is due to the inverse relationship between price and quantity demanded and is explained by the first law of demand.
movements along the demand curve
changes in the price of the good itself always results in this. two types of movements:
contraction
expansion
factors affecting demand..shifts along demand curve
CHNAGE IN INCOME
Changes in the consumer’s income can affect demand in two ways however this depends on the nature of the good being demanded.
normal good
as consumer’s income increases the demand for a normal good increases. Normal Goods have a positive relationship between consumers’ income and quantity demanded.
inferior good
as a consumer’s income increases the demand for inferior goods decreases as consumers choose to buy less of these goods as these goods are usually of poor quality. Inferior goods have an inverse relationship between consumers’ income and quantity demanded.
Changes in taste and preference
changes in favor of a good would cause demand increase at the same price
changes in opposition / against a good would cause demand to decrease at the same price
Complement good-
An object used in combination with another product or service is a complementary good or service..has little value when not paired with it’s complement.
bread and butter, computers and printers
substitute goods
a product or service that consumers see as essentially the same or similar-enough to another product. a good that can be used in place of another.
conatct lenses vs spectacles
laptop computers versus desktop computers
the first law of demand
states that as the price of a good or service is lowered, consumer demand increases
factors affecting of demand
- price of other goods
- changes in income of the individual/consumer
- advertising
- population of the country
- fashion and taste
- government influences- by ccreating laws like all homes require fire alarms (increasing demand for fire alarms)
prices of other goods
complementary goods- when the price of cars goes down, the demand for cars increases and the demand for petrol also increases
subsitute goods- when the price of butter increases, the demand for butter decreases and the demand for margarine increases.
