Demand Flashcards
What is a market?
A situation where buyers and sellers communicate and exchange goods and services for money
What is:
Demand
Demand is the quantity of goods and services that people are willing to buy at a given price in a given period of time
What is:
Market demand
Market demand is the demand for goods and services by all people within a market, added together
What is the:
Law of Demand
The Law of Demand states that if the price of a good or service rises, the quantity of demand will fall. Likewise, if the price of a good falls, then the quantity demanded will increase ceteris paribus
What is:
Contraction of demand
When quantity demanded decreases as a result of an increase in price. This is shown by a movement along a demand curve
What is:
Expansion of demand
When quantity demanded increases as a result of a decrease in price. This is shown by a movement along a demand curve
What is:
Substitute goods
Products which are possible alternatives for each other, so that a change in price of one will affect the demand for the other
What are:
Complementary goods
Products that are consumed together. Therefore, a change in demand for one will lead to a change in demand for the other
What is shown by the:
Demand curve
The relationship between price and quantity demanded
What is the shape of the:
Demand curve
A straight line, but in reality it is a curve like the bottom half of a ‘c’
What is the:
Ceteris Paribus Assumption
Latin phrase meaning “all other things being equal”
What is the acronym for:
Factors that shift the demand curve:
Population
Advertising
Credit Availability
Income
Fashion, Tastes and Trends
Income Tax
Complements price
Subsitutes price
What is the affect of:
Population on the demand curve
With more people, more people will be willing to buy the product , leading to an outward shift of the demand curve
What is the affect of:
Advertising on demand
Businesses try to influence customers thorugh advertising, meaning that more people will buy the product, leading to the demand curve shifting outwards
What is the affect of:
Credit availability on the demand curve
If intrest reates are low, it means that people have more money as they borrow more money and therefore they will want to buy more meaning demand increases leadng to an outward shift of the demand curve.
What is the affect of:
Income on demand
With higher income, people have more money and buy more leading to an increasing demand and therefore to an outward shift of the demand curve
What is the affect of:
Fashion, Tastes and Trends on the demand curve
If the fashion is to buy a product, demand of that price rises leading to an outward shift of the demand curve. Opposite applies
What is the affect of:
Income tax on the demand curve
The higher the income tax is the less people have money so the less they spend meaning demand goes down and curve shift inwards
What is the affect of:
Price of complements
If price of complements go down, total cost of buying both goods goes down leading to increasing demand due to total cost decreasing and an outward shift of the demand curve
What is the effect of:
price of substitutes on demand curve
If price of substitutes goes down, people are more likely to buy the other product so demand goes down leading to an inward shift of the demand curve
