Demand Flashcards
price of complement decreases
increase in demand
price of substitute increases
increase in demand
income increases (normal good)
increase in demand
income decreases (inferior good)
increase in demand
personal wealth decreases
decrease in demand
population increases
increase in demand
expectation that price will fall in future
decrease in demand
successful advertising campaign
increase in demand
what is the theory of demand?
at a higher price a lower quantity will be demanded, ceteris paribus and vice versa
effective demand
willing AND able
why is a demand curve downwards sloping?
income and substitution effects
substitution effect
as price rises (or income decreases) consumers replace more expensive goods with cheaper alternatives - decrease in quantity demanded
income effect
as income increases, quanity demanded of good increases as consumers are wealthier, good is relatively cheaper
demand equation
Qd = mP + A
equation for gradient in demand graph
change in Qd / change in P
change in x / change in y
what is A on demand equation?
x-intercept
movement along demand curve
when go from one combination on the demand curve to another
change that depends on price
shift in demand
when anything other than price changes
exceptions to theory of demand
vertical demand curve
Veblen goods
Giffin goods
vertical demand curve
will buy same quantity at any price, e.g. life-saving medication
Veblen good
upwards sloping demand curve
very wealthy pay more to show status
Giffin good
extreme subset of inferior goods
e.g. under extreme poverty, when price of bread rises forced to lose other food sources because bread relatively cheapest and invest everything in bread purchasing
