Demand ( 2 ) Flashcards

1
Q

What is derived demand?

A
  • 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
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2
Q

What is joint demand?

A
  • Complementary goods that are often used together.

* Goods are bought together

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3
Q

What is competitive demand?

A

• 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.

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4
Q

What are substitute goods?

A

Those which are alternatives to one another

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5
Q

What are complementary goods?

A

Goods that are often used together.

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6
Q

Composite demand?

A

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

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7
Q

PIRATES?

A
P - Population
I - Income
R - Related Goods
A - Advertising
T - Taste
E - Expectations
S - Seasons
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8
Q

How does population affect demand?

A

• Larger the population, the higher the overall demand in the economy.

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9
Q

How does income affect demand?

A

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.

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10
Q

What are normal goods?

A

Those goods whose demand will increase if the real income increases, this means a rise in income causes a shift to the right.

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11
Q

What are inferior goods?

A
  • 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
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12
Q

How does distribution of income affect demand?

A
  • 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
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13
Q

How do related goods affect demand curve?

A
  • 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.
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14
Q

How does advertising affect demand?

A

Increases customer loyalty to the good and exposure, increasing demand

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15
Q

How does taste affect demand?

A

If a particular good is in fashion, it will have a greater demand

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16
Q

How do expectations affect demand?

A

Can increase demand w/ positive expectations

17
Q

How do seasons affect demand?

A

The weather will affect demand, hot weather = more ice cream demand