Demand Flashcards
What is demand
Demand for a good or service is the quantity that purchasers are willing and able to buy
What is the general shift of demand when income increases
Demand shifts to the right as demand increases and income increases
What is a normal good
A good that experiences an increase in demand due to the increase in income
What is an inferior good
A good that experiences a decrease in demand when there is an increase in prices
What happens to the demand for normal goods when income rises
Demand for normal good increase e.g. houses, cars, luxuries
What happens to the demand for inferior goods as income increases
Demand for inferior goods decrease e.g. public transport, supermarkets ect
What are substitutes
Goods that can be readily switched from one to another to perform the same job e.g butter and margarine
What happens to the demand of one if the price of the other substitute increases
If the price increases for one, the demand for the other will increase
What happens to the demand of one if the price of the other substitute decreases
If the price of one decreases the demand for that will increase and the demand for the other substitute will decrease
What are complimentary goods
A good that is used in conjunction with another good e.g car and petrol, Xbox and games
What happens to the demand of one complimentary good if the price of the other increases
The demand decreases, shifts left
What happens to the demand of one complimentary good if the price of the other decreases
The demand increases, demand shifts right
What are the 5 factors affecting demand
Changes in:
.income
.population
.fashion
.legislation
.advertising
Define utility
A measure of the satisfaction that we get from purchasing and consuming a good or service
Define total utility
The total satisfaction from a given level of consumption
What is marginal utility
The change in satisfaction from consuming an extra unit
define consumer surplus
the difference between the amount that consumers are willing and able to pay for a good or service and the amount they actually pay
where is the consumer surplus on a graph
the triangle above the market average
what is derived demand
the demand for a factor of production used to produce another good or service
is labour a derived demand in a free market economy
yes
what is composite demand
where goods have more than one purpose e.g. milk
what happens to demand if there is a more equal distribution of luxury goods and why?
demand decreases so it shifts left as there are fewer really rich people who can afford the luxury items
what happens to demand if there is a more equal distribution of everyday goods and why?
demand increases so it shifts left as there are more people who can afford the everyday items
