Demand Flashcards
Demand
indicates various quantities of a good that consumers are willing and able to buy at different possible prices during a given period
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Quantity demanded
Amount of units of a good or service wanted by comsumers
Normal good
Postive correlation with income
(as income increases; demand for nomral goods increases)
example: car
Substitute Good
two or more goods which satisfy a similar need so that one good can be used in place of another
(as price of substitude good increases; demand for other good increases)
Inferior Good
negative correlation with income
(as income decreases; demand for inferior goods increases)
example: instant noodles
Factors which make up the down sloping demand curve
- diminishing marginal utility
- income effect
- substitute effect
Extension
Movement along the curve as quantity demanded increased as price moved downward
Complement Good
two or more goods which are interdepedent on one another and tend to be used together
(increase in price of complement; decrease in demand for other good)
Increase in demand
Curve shifts right
Decrease in demand
curve shifts left
Market Demand
Sum of demand of all individual consumers in a market
Contraction
Movement along the curve as quantity demanded decreased as price moved upwards
non price determinants
definition
variables which affect the demand and that determine the position of the demand curve regardles if price has changed
competitive markets
a market composed of buyers and sellers acting independently none of whom has any ability to influence the price of a product
competition
when there are many buyers and sellers acting independently so no one can influence the price at which a product is sold in the market
Demand Curve
A curve showing the relationship between the price of the good and the quantity of the good demanded
law of demand
A law stating that there is a negative relationship between the price of a good and a quantity of the good demanded
market
A kind of arrangement where buyers and sellers of a particular good, service or resource are linked together to carry out an exchange
causes of decrease in demand
- taste & preferences
- decrease in income
- weather (bad-> no one buys ice cream)
- decreasing advertisement
- decrease in population
- unfavorable reasearch
- decrease in price of substitution good
- increase in price of complement
causes of increase in demand
- increase in income
- increase in population
- advertising
- favorable researcg
- taste & preferences
- weather/climate
- price decrease of complement
- price increase of suplement
ceteris paribus
all other things equal
(other variables remain unchanged besides variable you’re loking at)
Increased Demand diagram
