Demand Flashcards
What is a market?
A market is where buyers and sellers come together to make an economic transaction.
What is demand?
Demand is the quantity of a good or service that consumers are willing to and able to purchase at different prices in a given time period.
What is effective demand?
That consumers are both willing and able to purchase a good or service.
What is the law of demand?
As the price of a product falls, the quantity demanded of the product will increase, ceteris paribus, a inverse relationship where the demand curve slopes downwards.
How can the law of demand be illustrated?
Through a demand schedule or demand curve, a demand schedule is a table and the curve is a graphical representation, both showing the relationship between the price of a product and the quantity demanded.
What does a “change in the quantity demanded” mean?
A change in the price of the product itself will lead to a change in the quantity demanded of the product, ie. a movement along the curve.
What is a “change in demand”?
A shift of the demand curve to the left or right, these shifts are caused by non-price determinants.
What difference does the shift in demand have comparing normal goods to inferior goods?
For normal goods, the demand will rise as income rises, as consumers now can purchase more. However, with inferior goods, as income rises, the demand will fall as consumers will begin buying higher-priced substitutes in place of the good.
What are substitutes and what do they lead to?
If products are substitutes of each other, a change in the price of one of the products will lead to a change in the demand for the other. For example, if there is a fall in the price of chicken, there will be an increase of the quantity demanded of chicken (movement along the curve) and a fall in the demand for beef (shift to the left).
What are complements?
Complements are products that are often purchased together. If products are complements of each other, a change in the price of one of the product will lead to a change in demand for the other. An example might be a fall in the price of game consoles, leading to a increase in demand for games.
How does a change in consumer taste affect a demand curve?
If tastes change in favor of a product, a shift right should occur; more demand, and vice versa. Tastes are affected by trends, marketing, adverts, etc.
How do future price expectations affect a change in demand?
If consumers think that the price of a product will increase, demand will increase. In the same way, if consumers expect that the price of a product will decrease, demand will decrease. For example, a cigarette tax (more demand now), and Black Friday, (less demand now, more later).
How does the number of consumers change demand?
If an increase in consumers is evident, demand will increase, and vice versa. However, demand patterns for certain products can also be affected by the demographic of the country, ie. more old people, more support chairs.
What is the distinction between a movement along a demand curve and a shift of the demand curve?
A change in the price of the good itself leads to a movement along the curve, while a change in any of the non-price determinants will always lead to a shift of the demand curve to the left or right.
What is the relationship between individual consumer demand and market demand?
Everything dealt with before is the. individual consumers’ demand curves, but it is possible to construct the demand curve for a whole market by horizontal summing.
