Demand Flashcards
Law of demand
As the price of a good falls, demand increases and as price rises, demand falls.
Demand
Is a schedule that shows the amounts of a good that consumers are willing and able to purchase at various prices.
What effects law of demand?
Price, marginal utility, substitution effect and income effect.
Marginal utility
Satisfaction decreases as you consume more of a good.
Income effect
When the price of a good goes down the consumer has more income to purchase a good.
Substitution effect
Consumer will choose the less expensive, alternative product.
Causes for shift in a demand curve is:
Incomes of buyers, prices of related goods, tastes and preferences and number of buyers in market.
Normal good
Increase in income results in increase of demand.
Example of normal good?
Clothing and dining out.
Inferior good
Increase in income results in decrease of demand.
Example of a inferior good?
Public transportation
Substitute
One good can be used to replace another.
When two goods are substitutes and the price of one increases or decreases ?
The other good demand increases or decreases.
Complementary goods
When consumption is positively correlating.
If the price of a complementary good increases and vice versa.
The demand for the other decreases or vice versa .
