Demand Flashcards
chapter 3
what is demand?
the number of units of goods a consumer will buy at various prices.
the law of demand
states that an increase in price leads to a decrease in quantity demanded or an decrease in price leads to an increase in quantity demanded.
what is a consumer surplus?
the benefit to consumers due to the difference between what consumers actually pay to consume a good and what they would have been willing to pay rather than go without the good.
what is an individual demand
the quantities of a good that an individual consumer is prepared to buy at each price
what is a market demand/ aggregate demand?
shows the different quantities of a good that all consumers in the market are prepared to buy at each price.
it is derived by adding together all the individual quantities demanded for a good.
what is a demand schedule?
a table that shows the different quantities demanded for a good at various market prices at any given time.
what is an individual demand schedule?
lists the different quantities of a good that an individual consumer is prepared to buy at each price.
what is a market/aggregate demand schedule?
lists the different quantities of a good that all consumers in the market are prepared to buy at each price.
it is derived by adding together all the individual demand schedules for the good.
what is a demand curve?
a graph illustrating the demand for a good at various prices at any given time
what is effective demand?
consumers must be willing to buy and be capable of paying the price set by the supplier. It is demand backed by the necessary purchasing power (i.e. money)
what is derived demand?
When one commodity is an essential part of another commodity and it is demanded not for its own sake but because it is required to manufacture another good.
(e.g. timber and furniture, steel and cars)
what is compose demand?
when a commodity is required for a number of different uses
e.g. sugar
what is joint demand?
when the demand for one commodity is joined with the demand for another. (complementary goods)
e.g. cars and petrol, golf clubs and golf balls,…
why does the demand curve slope downwards from left to right.
there is a negative (inverse) relationship between price and quantity demanded.
a shift in the demand curve
caused by a change in any non-price determinant of demand
movement along the demand curve
caused by a change in the price of the good itself
factors affection the demand of a good
the price of the good itself, the price of other goods, income of consumers, consumers´ expectations, tastes or preferences, unplanned factors, government regulations
the demand function
Dx = f (Px, Pog, Y, E, T, U, G)
what are complementary goods
goods that are used jointly. The use of one involves the use of the other.
e.g. bread and butter, cars and petrol,…
what are substitute goods
goods that satisfy the same needs and thus can be considered as alternatives to each other.
e.g. different brands of cereal, coffee, milk…
what is a normal good
a good that obeys the Law of Demand and which has a positive income effect
what is an inferior good
a good with a negative income effect
what is a giffen good
goods with positive price effect
i.e. more is bought as the price rises and less as the price falls
exceptions to the law of demand
giffen goods, snob value items, expectation goods, addictive goods
