DEMAND Flashcards
What is demand?
a quantity of a good/service that consumers are able and willing to buy at a given price during a given period of time.
Law of demand
Demand increases, As pricedecreases, inverse relationship
What are the factors that shift the** demand curve**
PIRATES
Popualtion
Income
Related Goods
Advertising
Tastes and Fashions
Expectations
Seasons
POPULATION (PIRATES)
larger population = higher demand
Changing the structure of the population also affects demand, such as the distribution of different **age groups. **
INCOME (PIRATES)
i
more disposable income=** afford **more goods, so demand **increases. **
a consumer’s wealth affects their demand.
RELATED GOODS (PIRATES)
substitutes or complements
A substitute can** replace** another good -* Apple & Samsung*
A complement **goes with **another good - Apple & Airpods
ADVERTISING (PIRATES)
. This will increase consumer loyalty to the good and** increase** demand.
TASTES AND FASHION (PIRATES)
demand curve will also shift if consumer tastes change. For example, the demand for physical books might** fall, if consumers **
start preferring to read e-books
EXPECTATIONS (PIRATES)
This is of** future price changes**. If speculators expect the
price of shares in a company to increase in the future, demand is likely to
increase in the present.
SEASONAL (PIRATES)
Demand changes according to the season. For example, in the
summer, the demand for ice cream and sun lotions increases.
What is the Price Elasticity of Demand (PED)
What is the formula?
The price elasticity of demand is the responsiveness of a change in demand to a change in price.
The formula for this is: % change of QD / % change of Price
Substitution effect
If price increases, consumers switch to a cheaper alternative
Income effect
If priceincreases, reduced disposable income may reduce demand
Inferior Good
Demand decreases as income increases
What way does the demand curve slope?
DOWNWARDS