Demand Flashcards
What is Demand?
the quantity of a good or service consumers are willing to buy at a particular price at a particular point in time.
Law of Demand
as the price of a good or service rises people buy less of it
Substitution effect
As the price rises product ‘value for money falls, and consumers substitute other products which provide better value for money.
Income effect
As price rises, purchasing power of consumers’ income falls
Normal good
As a person’s income rises, their demand for a normal good will increase
Inferior good
As a person’s income rises, their demand for an inferior good will decrease
Contraction
A increase in price would cause a contraction
Expansion
A decrease in price would cause a expansion
Non-price factors affecting demand
Advertising, price of substitutions, population factors, expectations, disposable income
Increase in demand
demand curve shifts right
Decrease in demand
demand curve shifts right
