Demand Flashcards
How is price determined?
Supply + Demand
Define demand?
Desire, willingness and ability to acquire a commodity
What is a demand schedule?
Demand schedule shows the quantity of a good or service that will be demanded at various prices
T/F: The quantity demanded and price are inversely related?
TRUE!!
More of a good or service will be demanded at a lower price than at a higher price
The demand curve is upward sloping or downward sloping?
DOWNWARD
DOUBLE D
What two factors cause the negative slope demand curve?
1) INCOME EFFECT- individuals can purchase more units at a lower price
2) SUBSTITUTION EFFECT- lower priced items will be purchased as substitutes for higher priced items
What is the market demand curve?
It is simply a SUM OF INDIVIDUAL DEMAND CURVES
Movement along the quantity are only impacted by?
PRICE
What is a change in demand? What causes it?
SHIFT in demand curve which is caused by:
- Factors OTHER THAN PRICE:
- Size of the market
- Wealth of buyers
- Price of other goods
- Buyer preference
What are two factors of note that influence change in demand?
NUMBER 1:
- Change in price of substitute commodity: Substitute commodity satisfies same basic purpose as the commodity of concern
- Price of substitute commodity and demand for commodity of concern move in the same direction
NUMBER 2:
- Price of complementary commodity
- Complementary commodity is used jointly with commodity of concern
- Price of complementary commodity and demand for commodity of concern move in OPPOSITE DIRECTIONS
What is the difference between a CHANGE IN QUANTITY DEMANDED and CHANGE IN DAMAND?
Change in quantity demanded- movement along a demand curve as a result of a CHANGE IN PRICE ONLY.
Change in demand: Shifts that result from factors other than price.
- Increase in demand- Shifts right and upward
- Decrease in demand- shifts left and downward
