Demand and the Demand Curve Flashcards
What is demand?
the amount that consumers (the market) are willing and able to buy at each given price point
What is contraction in demand?
falls in quantity demanded caused by rises in prices
What is extension in demand?
increases in quantity demanded caused by falls in price
What is the Law of Demand?
there is an inverse relationship between price and quantity demanded (assuming all other factors remain unchanged)
What does PASIFIC stand for, and what do these non-price factors result in?
Population, Advertising, Substitute’s price, Income, Fashion/tastes, Interest rates, Complement’s price. These result in shifts in the demand curve.
What is a substitute?
replacement for another product
What is a complementary good?
goods that are consumed together (e.g. a printer and printer ink)
What is a normal good?
a good or service that will see an increase in demand when income rises, e.g. an expensive car. (there is a positive relationship between income and demand)
What is an inferior good?
a good or service that will see demand fall when income rises, e.g. fast food. (there is an inverse relationship between income and demand)
What is composite demand?
a good that is demanded for more than one purpose so that an increase in demand for one purpose reduces the supply for the other purposes (e.g. milk to make butter and cheese)
What is derived demand?
when the demand for one good or service comes from the demand for another good or service, meaning the good is a component of the other good (e.g. labour)
