Demand Flashcards
What is demand?
The quantity of a good / service consumers are willing and able to buy at a given price in a given time period
What is the law of demand?
There is an inverse relationship between price and quantity demanded
What is ceteris perebis?
When all external factors remain the same
What causes movements on a demand curve?
Price factors
What causes shifts on the demand curve?
Non price factors:
Population
Advertising
Substitutes
Income
Fashion
Interest rates
Compliment’s price
How does population affect demand?
If there is a larger population there will be more demand
How does advertising affect demand?
Better advertising will increase the demand
How does substitutes price affect demand?
If the price of a good / service’s substitute is cheaper the demand for that good will decrease
How does income affect demand?
As income increase our demand for normal goods will increase whereas as our income increase our demand for inferior goods decrease.
How does fashion affect demand?
If fashion moves towards a good / service our demand for it will increase.
How do interest rates affect demand?
As interest rates decrease our demand for goods increase as consumers are more likely to borrow money as the money the interest is lower.
What does compliments price mean?
If the price of the compliment increases, the demand for the good or service will decrease.
