Demand and supply Flashcards
Definitions
Inferior good
Goods which have a negative income effect ⬆️income⬇️Qd E.g off brand goods
Normal goods
Goods which have a positive income effect. As income increases so does Qd E.g clothes
Substitute goods
Goods which fulfil the same purpose and this thus be considered alternatives e.g neurofen, calpol
Complementary goods
Goods which are in joint demand.They are used/ consumed together e.g shampoo & conditioner
Speculative goods
Goods purchased in hope value will increase into the future e.g stocks
Giffen goods
If price decreases consumers may actually not purchase more of these goods. they will purchase same amount and use extra money for something nice e.g meat
Addictive goods
No matter how high the price is, people will still buy the goods as they are addicted to them e.g drugs
Snob goods
Goods that demand an extremely high price therefore show high wealth = image of luxury, more people buy them
Law of supply
The price offered for a good increases, more of it will be supplied
The law of demand
An increase in price will lead to a decrease in quantity or decrease in price, leads to increase in quantity demanded
P⬆️QD⬇️. P⬇️QD⬆️
Price elasticity if demand [PED]
The responsiveness of the Qd of a good to a change in price of a good
Income Elasticity if demand [YED]
The proportionate change in the Qd for a good caused by the proportionate change in the income of consumers
Elastic demand
Percentage change in Qd > percentage change in price
Inelastic demand
Percentage change in Qd < percentage change in price
Law of supply
Price offered for a good increases more of it will be supplied
