demand Flashcards
1
Q
demand
A
the quantity a customer is willing to buy at a given price
2
Q
basic law of demand
A
it is that demand varying inversely with price - lower price makes product more affordable
3
Q
inferior goods
A
-cheap substitutes e.g.
demand drops as income increases
4
Q
luxury goods
A
demand increases as income increases
5
Q
normal goods
A
demand increases as income increases
6
Q
Income effect
A
- a fall in price increases the purchasing power of customers
- allows customers to buy more in a given budget
7
Q
substitute effect
A
- the fall in prices of good x makes it cheaper compared to substitutes
- customers will switch to good x leading to higher demand
-depends weather the products are close substitutes
