DEMAND AND DEMAND CURVE Flashcards
DEMAND IS
Quantity of g/s consumers are willing and able to buy
at a given price
in a give time period
what does demand have to be for it to exist
effecitve
demand being effective means
people willing and bale to buy
law of demand has what kind of relationship
inverse relationship between QD and Price
as price increases in demand waht happens to QD
decreases
and vice versa
on x axis when drawing deamnd curve what is there
price
on y axis when drawing demand curve waht is there
quantity deamdned
show law of demand on graph
axis labelled x - qd y - price
price increase p1 - p2 demand goes from q1 to q2
Price decreases p1 - p3 increase in qd from q1 to q 3
when we increase price what happens to demand curve
3 marks
we move up demand curve
get contraction in demand
see reduction in QD
ceteris paribus mean
all other factors remaining equal
ceteris paribus allows us to
isolate impact of price changes and see impact it has on qd
When we decrease price waht happens to demand curve 3 marks
move down deamnd curve
- extension/expansion of demand
increase in QD
when price changes theres ..
2 marks
change in QD by movement along demand curve
what 2 effects can we use to explain downward sloping nature of demand
INCOME EFFECT
SUBSTUTION EFFECT
Explain income effect when price increases
5 matks
If prices go up
our income cant stretch as far , as purchasing power decreases ,
we are less able to buy ,
i.e Y dont allow us to buy same Q of g/s as before
so demand contracts
vise versa
explain substitution effect when price increases
5 marks
Price of g/s increases
we demand less
As price go up other g/s become more price competitive
so we switch demand and consumption towards buying those g/s instead
hence why demand contracts for specific good /s
vice versa
substituiotn and income effect assume
ceteris paribus
when we drop ceersi paribus we allow
non price factors to affect and shift demand
Increase d - shifts d
right
decreased d shift d
left
as non price factors shift D regardless of price when using grah we
shift at same price
draw demadn curve shifting becuase of price
5 marks
axis labelled y- price x - QD
shifts of price up and down
shift of QD left and right
contraction upward
expansion downward
acronmy to rember non price shifters of demand
PASIFIC
P stands for
Population
A stands for
Advertising
S stands for
substitute prices
i 1stands for
income
F stands for
fashion / trends
I 2stands for
interest rates
C stands for
complements
increase in population affects on demand ? + draw
more demand for certain g/s
shift form D1 - D2 ,
QD increase from Q1 to Q2
Advertising affcets
willingness to buy somehting
good adv affect on demand , bad adv such as bad pr new article
shift right from d1 - d2 increasing demand q1 - q2
bad adv such as bad news article effect on demand 3 marks
demand curve shift left
we become less willing to buy
qd drops d1 -d3
how do substitutes affect demand e.g price of pepsi go up 3 marks
more people willing and more able to buy coke
shifting demand curve from d1 - d2
and qd right (increases)
vise versa
when looking at income what should we distinct between
normal and inferior goods
when income rises what happens to normla good
increase in demand
income rise what happens to demand for normal goods 3 marks + graph wise
demand shifts right qd increases
more people willing and able ot buy something like fine dining
with inferior goods waht ahpoens when incomes increase
demand for them decreases
whats a beautiful word to describe inferior goods
counter cyclical
example of inferior good
fast food / public transport
what happens to demand for fast food when income rise 3 marks
demand shifts left
qd decreases
as more able to buy normal and luxury goods and services
fashion affects our waht to buy
willingness
lets say trend towards pop its increases what happens to demand
shift right
qd increases
as we demand more of that good AT THE SAME PRICE
in ternms of IR what type of goods do consumers borrow money for
holidays
houses
cars
explain what happens to g/s when IR go down 2 marks
cheaper for consumers ot borrow
increasing demand for g/s-
D shift right + qd increases
AND VISE VERSA
for complemetary good e.g printer if price of printers go up what happens to demand for printer ink and vice versa
DEMAND FOR PRINTER INK DECREASES
DEMAND CURVE SHIFTS LEFT
but if price of printer go down demand for printer ink would increase shifting d1 - d2
What is important about complementary goods lets say if price of printer goes up and d for ink goes down - hint price
its not price of printer ink that changes but the price of printers that has changed
causing demand curve for ink to shift left
