What is derived demand?
- Demand for a good or factor of production used in making another good or service.
- This is when the good demanded has more than one use
What is joint demand?
- Complementary goods that are often used together.
* Goods are bought together
What is competitive demand?
• This is the demand for goods which are substitute, so the
sale of the good is in competition with the substitute.
• Increase in the price of one good will decrease the demand for it, and increase the demand for its substitute.
What are substitute goods?
Those which are alternatives to one another
What are complementary goods?
Goods that are often used together.
Composite demand?
Goods that have more than one use, assuming there is a fixed supply of a particular good like milk, an increase in demand for cheese will lead to a decrease in demand for butter
PIRATES?
P - Population I - Income R - Related Goods A - Advertising T - Taste E - Expectations S - Seasons
How does population affect demand?
• Larger the population, the higher the overall demand in the economy.
How does income affect demand?
Changes to real income, changes the amount of goods/services that a consumer can afford to purchase with income, and can affect the demand for different types of goods differently.
What are normal goods?
Those goods whose demand will increase if the real income increases, this means a rise in income causes a shift to the right.
What are inferior goods?
- Those which people demand less of as their real income increases, a rise in real income causes the demand curve to shift to the left.
- People will switch to the more expensive good instead
How does distribution of income affect demand?
- A more equal distribution of income, will cause the demand for luxury goods to shift to the left, and the demand for other goods to shift to the right
- Fewer wealthy people that can afford luxuries
How do related goods affect demand curve?
- Substitute good prices can affect the demand, if the price of an alternative falls, the demand for the more expensive one lowers, and the demand for the alternative rises.
- Complementary goods, if the cost of a complementary good rises, the demand for it decreases, and the overall demand for both goods decreases because fewer people will be buying them.
How does advertising affect demand?
Increases customer loyalty to the good and exposure, increasing demand
How does taste affect demand?
If a particular good is in fashion, it will have a greater demand
How do expectations affect demand?
Can increase demand w/ positive expectations
How do seasons affect demand?
The weather will affect demand, hot weather = more ice cream demand
