Demand Flashcards
What is the definition of demand in economics?
Demand is the quantity of a good or service that consumers are willing and able to buy at a particular price in a certain period of time.
What is the difference between individual demand and market demand?
Individual demand refers to the demand of a single consumer for a product, while market demand is the sum of all individual consumers’ demand for a product.
What does the Law of Demand state?
The Law of Demand states that the demand for a product varies inversely with its price.
What are the two main reasons behind the Law of Demand?
The income effect, where a rise in price reduces buying power, and the substitution effect, where consumers switch to substitutes offering better value for money.
What does the term “ceteris paribus” mean in economics?
Ceteris paribus is a Latin phrase meaning “other things remaining the same,” used to isolate the effect of one changing variable.
What is meant by extension and contraction of demand?
Extension refers to an increase in quantity demanded as price decreases, while contraction refers to a decrease in quantity demanded as price increases.
How is a shift in the demand curve different from a movement along it?
A shift represents changes in demand due to non-price factors, while movement along the curve represents changes in quantity demanded due to price changes.
What are normal goods?
Normal goods are those for which demand increases as income rises, such as cars, televisions, and holidays.
How does population size and composition affect demand?
An increasing population raises demand for goods and services, while age composition can shift demand toward age-specific products.
How does advertising influence demand?
Successful advertising campaigns increase demand for a product, shifting its demand curve to the right.
How do personal tastes and preferences impact demand?
Changes in tastes, influenced by factors like fashion and new products, can shift demand for certain goods.
What role do seasonal factors play in demand?
Seasonal factors influence demand for products like bikinis, holidays, and umbrellas depending on the time of year.
How does the availability of finance affect demand?
Increased access to credit raises consumer demand, while restrictions on borrowing decrease it.
How do complementary goods influence demand?
A price reduction in a complementary good increases the demand for related goods, like petrol and cars.
What are competitive or substitute goods?
Competitive goods are alternatives to a product; a price drop in one can decrease the demand for the other.
