Demand 1.4 Flashcards
What is demand?
Quantity consumers are willing and able to purchase at various prices, focused on what they can afford to buy.
What is a demand curve?
Shows quantity demanded at each price, usually sloping downward (higher demand at lower prices).
Movement along the demand curve
A change in price leads to a movement along the curve (e.g., price drop extends demand, and price rise contracts it).
Factors leading to a change in D—prices of substitutes
Lower price of a substitute decreases demand for the original product.
If a substitute product’s price falls, demand for it rises, reducing demand for the original.
Factors leading to a change in D—price of complements
Goods used together (e.g., milk and cereal).
Drop in a complementary product’s price increases demand for both (e.g., lower skiing accessory prices increase demand for skiing holidays).
Factors leading to a change in D—consumer income
Normal Goods: Demand rises with income.
Inferior Goods: Demand falls with income (e.g., generic brands).
Factors leading to a change in D— Fashion,tastes and preferences
Changes in trends and popular preferences can shift demand (e.g., more demand for bicycles due to cycling success stories).
Factors leading to change in D— Advertising and branding
Increased advertising can boost demand as businesses build brand recognition
Factors leading to a change in D— demographics
Population Growth and Structure: Affects demand based on age, gender, geographic distribution, etc.
Example: Aging population increases demand for healthcare services.
Factors leading to change in D- external shocks
Competition: Entry of a new competitor can decrease demand for existing products.
Government Policies: Taxes or legal changes can curb or increase demand.
Economic Climate: Growth boosts demand; recession lowers it.
Social and Environmental Factors: Trends like social media use and environmental concerns affect demand (e.g., electric cars).
Factors leading to a change in D— seasonality
Demand for some products changes by season or events (e.g., garden furniture in spring).
Complementary goods def
Products used together, where the demand for one affects the other (e.g., cars and car insurance).
