Demand Flashcards
unit 1.3.1
What is the idea behind demand ?
as the price of something goes up the quantity of consumers willing to pay goes down and vice versa
What is demand ?
the quantity of a good that consumers are willing and able to purchase at various prices during a given time
What direction does a demand curve go in ?
down
What causes a movement along the demand curve ?
price changes ONLY
What can demand do on a demand curve (movement) ?
expand or contract
What does not cause a shift on the demand curve ?
price changes
What does an inward shift mean ?
less quantity demanded
What does an outward shift mean ?
more quantity demanded
What are the factors that shift the demand curve (PIRATES) ?
population
income
related/complement goods
advertising
tastes and fashions
expectations
seasons
What is meant by population ?
more people = more demand
What is meant by income ?
more disposable income = more people being able to afford = more demand
What is meant by related goods ?
a substitute being able to replace an original good if it’s cheaper
What is meant by complement goods ?
something that pairs with another good e.g. strawberries and cream
What is meant by advertising ?
more of it can increase loyalty and therefore demand
What is meant by tastes and fashions ?
as tastes change demand will fluctuate
Wha is meant by expectations ?
if future prices are expected to change demand now will reflect the change
What is meant by seasons ?
demand changes according to the season e.g. pumpkins at Halloween
What is effective demand ?
willingness to buy along with the ability to pay
What is consumer sovereignty ?
consumers deciding what will be produced and firms supplying that to get revenue.
What do consumers decide ?
how resources will be used
What is the invisible hand ?
a greater demand creating an incentive for firms to produce more and meet it
What happens if resources cost more/become scarce ?
prices will be raised and consumers will buy less; it is the same if the roles are reversed
What do movements along a demand curve mean ?
the price has changed and the quantity demanded has changed
What do shifts on the demand curve mean ?
a determinant has changed and the demand has changed
