Demand Flashcards
Markets are
Where goods and services are bought and sold.
The price charged for and quantity sold are determined by
The levels of supply and demand in a market.
Sub markets
Smaller markets that make up a market.
Demand for goods or services
Is different at different points.
Going back along demand curve = contraction in demand
Going towards along demand curve = extension in demand
The relationship between price and quantity demanded can be explained using
The law of diminishing marginal utility.
And
The income and substitution effects.
Income effect
Assuming a fixed level of income.
As price falls amount that consumers can buy with their income increases.
So demand increases.
Substitution effect
A fall in price in a good makes it relatively cheaper than other goods.
Consumers increase demand for cheaper good and reduce demand for more expensive good.
Changes in demand
Cause a shift in the demand curve.
Moves left = decrease in demand vicd versa.
There are lots of
Factors that can cause a shift in the demand curve.
Factors that cause shift in demand curve
Changes in tastes and fashion.
Changes to people’s real income.
Real income
The amount of goods/services that a consumer can afford to purchase with their income.
Normal goods
Are goods of which people demand more of if their real income increases.
Inferior goods.
Are those which people demand less of if their real income increases.
A more equal distribution of income may
Cause demand curve for luxury goods to shift left.
And other items to shift to the right.
Changes in demand in one market
Can affect demand in other markets.
