Demand Flashcards
Effective Demand
Consumers must be willing to buy and be capable of paying price set by the supplier. It is demanded back by the necessary purchasing power (i.e. money)
Derived Demand
Derived demand occurs 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.
Composite Demand
Composite demand occurs when on a commodity is required for a number of different uses e.g. sugar
Joint Demand
When the demand for one commodity is joined with the demand for another.
A Shift in the Demand Curve
Caused by the change in any non-price determinant of demand e.g. a change in consumers’ income.
A Movement Along the Demand Curve
Caused by a change in the price of the good itself.
Complementary Goods
Goods that are used jointly. The use of one involves the use of the other. e.g. cars and petrol
Substitute Goods
Goods that satisfy the same needs and thus can be considered as alternatives to each other.
e.g. Butter and low-fat spread.
Normal Good
A good that obeys the law of demand and which has a positive income effect.
Inferior Good
A good which has a negative income effect.
Giffen Goods
Goods with a positive price effect. i.e. more is bought as the price rises and less is bought as the price falls.
Market Equilibrium
If no interference in the market occurs, price will eventually settle at the level where quantity demand equls quantity supplied. This position where there is no tendency for prices to change.
