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Economics > Demand And Law Of Demand > Flashcards

Demand And Law Of Demand Flashcards

1
Q

What is demand?

A

Demand for a commodity, is an effective desire, refers to the quantities of a commodity which consumers are willing and able to purchase at various possible prices during a particular period of time.

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2
Q

What are the types of Demand?

A
  1. Individual Demand and Market Demand
  2. Ex ante and Ex post Demand
  3. Joint Demand
  4. Derived Demand
  5. Composite Demand
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3
Q

INDIVIDUAL DEMAND

A

Individual demand refers to the quantities of a commodity that an individual consumer is willing to purchase at various prices during a given period of time. (Also called household demand)

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4
Q

MARKET DEMAND

A

Market demand refers to the total quantities of a commodity that all the households are willing to buy at various prices during a given period of time.

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5
Q

EX ANTE DEMAND

A

Ex ante demand refers to the amount of goods that consumers want to or willing to buy during a particular time period.

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6
Q

EX POST DEMAND

A

Ex post demand refers to the amount of the goods that the consumers actually purchase during a specific period.

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7
Q

JOINT DEMAND

A

Joint demand refers to the demand for two or more goods which are used jointly or demanded together.

E.g.: cars and petrol, butter and bread, milk and sugar.

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8
Q

DERIVED DEMAND

A

The demand for a commodity that arises because of the demand for some other commodity is called derived demand.

For instance, demand for steel, bricks, cement, stones, wood, etc. is a derived demand— derived from the demand for houses and other buildings.

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9
Q

COMPOSITE DEMAND

A

Demand for goods that have multiple uses are called composite demand.

(Such as use of steel for making various things like bus bodies, utensils, etc.)

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10
Q

What are the factors affecting demand?

A
  1. Price of the commodity
  2. Income of the consumer
  3. Consumers’ taste and preferences
  4. Prices of related goods
  5. Consumers’ expectations
  6. Consumer-Credit facilities
  7. Demonstration Effect
  8. Size and composition of population
  9. Distribution of Income
  10. Climatic factor
  11. Government Policy
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11
Q

What are the types of goods?

A
  1. Normal goods
  2. Inferior goods
  3. Inexpensive necessities
  4. Substitute goods
  5. Complementary goods
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12
Q

NORMAL GOODS

A

Normal goods are those goods the demand for which increases with increase in income of the consumers, and decreases with fall in income.

(Luxury goods: television, clothes, refrigerator,etc.)

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13
Q

INFERIOR GOODS

A

Inferior goods are those goods the demand for which falls with increase in income of the consumer.

(Maize and jowar)

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14
Q

INEXPENSIVE NECESSITIES

A

The demand of these goods remains the same no matter how much increase or decrease in income occurring.

(Salt, matchbox,etc.)

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15
Q

SUBSTITUTE GOODS

A

Substitute goods are those goods which satisfy the same type of need and hence can be used in place of one another to satisfy a given want.

(Tea and coffee, coke and Pepsi)

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16
Q

COMPLEMENTARY GOODS

A

Complementary goods are those goods which are complementary to one another in the sense that they are used jointly or consumed together to satisfy a given want.

17
Q

What is Demand Function?

A

A demand function states the relationship between the demand for a product and its various determinants.

18
Q

What is law of demand?

A

Law of demand states that, other things remaining equal, the quantity demanded of a commodity increases when its price falls and decrease when its price rises. (Inverse relationship between the price and the quantity demanded of a commodity.)

19
Q

What is demand schedule and its types?

A

The demand schedule is a tabular statement that shows different quantities of a commodity that would be demanded at different prices during a given period.

  1. Individual demand schedule
  2. market demand schedule
20
Q

What is demand curve?

A

Demand curve is a graphical presentation of the law of demand.

  1. Individual demand curve
  2. Market demand curve
21
Q

What are the reasons for downward slope of the demand curve?

A
  1. Law of diminishing marginal utility
  2. Income effect
  3. Substitution effect
  4. Increase in number of consumers
  5. Several uses of a commodity
22
Q

What are the exceptions to the law of demand?

A
  1. Giffen goods
  2. Articles of Snob appeal (conspicuous consumption.)
  3. Expectations about future prices
  4. Emergencies
  5. Quality-Price Relationship
  6. Change in Fashion
23
Q

GIFFEN GOODS

A

Giffin goods are those inferior goods on which the consumer spends a large part of his income and the demand for which falls with a fall in their price.

24
Q

What is movement along the demand curve? (Change in quantity demanded)

A

When the amount demanded of a commodity changes (rises or falls) as a result of change in its own price, while other determinants of demand (like income taste and prices of related goods) remain constant, it is known as change in the quantity demanded.

25
Q

EXPANSION OF DEMAND

A

When the quantity demanded of a commodity rises due to fall in its price, other things remaining the same, it is called ‘rise in quantity demanded’ or ‘expansion of demand’.

26
Q

CONTRACTION OF DEMAND

A

‘Contraction of demand’ or ‘fall in the quantity demanded‘ refers to a decrease in the quantity demanded of a commodity as a result of rise in its price, other things remaining the same.

27
Q

What is shift in demand curve? (change in demand)

A

When the amount purchased of a commodity rises or falls because of change in the factors other than the own price of the commodity, it is called change in demand.

28
Q

INCREASE IN DEMAND

A

Increase in demand refers to a situation when the consumers by a larger amount of a commodity at the same price because of change in factors other than the own price of the commodity.

29
Q

DECREASE IN DEMAND

A

Decrease in demand refers to a situation when the consumers buy a smaller quantity of the commodity at the same price. decrease in demand takes place as a result of change in factors other than the own price of the commodity.

Economics (3 decks)

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