Demand Flashcards
What is demand?
Demand is the quantity of a good or service that consumers are able and willing to buy at a given price during a given period of time.
Finish the sentence: Price changes do not shift the demand curve but they:
Contract and Expand
What is the mnemonic that can be used to remember the factors that shift the demand curve?
PIRATES
Explain the ‘p’ in pirates?
Population - The larger the population, the higher the demand. Changing the structure of the population also effects demand, such as the distribution of different age groups.
Explain the ‘i’ in pirates?
Income - If consumers have more disposable income, they are able to afford more goods, so demand increases.
Explain the ‘r’ in pirates?
Related goods - Are substitutes or complements
Explain the ‘a’ in pirates?
Advertising - This will increase consumer loyalty to the good and increase demand.
Explain the ‘t’ in pirates?
Tastes and fashions - Demand curve will also shift if consumers tastes change. For example, the demand for physical books might fall if consumers start preferring to read e-books.
Explain the ‘e’ in pirates?
Expectations - This is of future price changes. If speculators expect price of shares in a company to increase in the future, demand is likely to increase in the present.
Explain the ‘s’ in pirates?
Seasons - Demand changes according to the season. For example, in the summer, the demand for ice cream and sun lotions increases.
What is derived demand?
This is when the demand for one good is linked to the demand for a related good.
What is a composite demand?
This is when the good demanded has more than one use.
What is joint demand?
This is when goods are bought together, such as a camera and a memory card
What does the law of diminishing marginal utility?
The law of diminishing marginal utility states that as an extra unit of the good is consumed, the marginal utility falls.
