Demand Flashcards
What is demand?
The quantity of goods and services that consumers are willing and able to buy at any given price over a period of time.
What causes an extension in demand?
An increase in demand due to a fall in price.
What causes a contraction in demand?
A decrease in demand due to a rise in price.
What are the 6 factors that can cause a shift in the demand curve?
1) Legislation.
2) Real income.
3) Advertising.
4) Fashion.
5) Population changes.
6) The price of other goods.
How can legislation cause a shift in demand?
The government can influence markets through legislation. E.g. making it compulsory to wear a bike helmet will increase demand, shifting the demand curve to the right.
How can fashion cause a shift in demand?
Social trends, such as fashion, can cause an increase demand. E.g. if a certain brand is deemed fashionable, demand will increase and the demand curve will shift to the right. Vice versa.
How can advertising cause a shift in demand?
The degree to which a good/service is advertised can influence demand. E.g. if a new product is advertised heavily, demand is likely to increase, shifting the demand curve to the right. Vice versa.
How can real income cause a shift in demand?
As real incomes rise, consumers have more disposable income, causing demand to rise and the demand curve to shift to the right. Vice versa.
How can population changes cause a shift in demand?
If a population (at whatever level, national, local, etc.) increases, demand for goods and services will rise, shifting the demand curve to the right. Vice versa.
How can the price of other goods cause a shift in demand?
Demand for a good or service can be influenced by the price of substitute or complementary goods. E.g. if the price of Coca Cola rises, demand for Pepsi is likely to increase.
What is the concept of diminishing marginal utility?
As a buyer is offered more of a given product, the less value they place on the last one brought. E.g. if a child is given one easter egg, they will enjoy it, however once they have consumed a lot of easter eggs, the satisfaction diminishes.
What is negative marginal utility?
When the consumption of too much of an item is harmful. E.g. consuming too many slices of cake will make you sick.
