Determinants of Demand Flashcards
What relationship does a demand curve show
The relationship between price and quantity demanded.
Demand Definition
The amount of a good or service that consumers are willing and able to buy at any given price.
Determinants of Demand
- Price
- Consumer Income
- Prices of other goods or services
- Consumer tastes and fashion
- Other Factors e.g. advertising
Normal Good Definition
A good that, if price rises, demand will fall and vice versa. i.e. negative correlation. When an increase in income leads to an increase in demand.
Inferior Good Definition
When an increase in income leads to a fall in demand.
Veblen Good Definition
When certain luxury goods with status appeal are consumed in greater quantity when their price rises.
Giffen Good Definition
When cheap staple foods are consumed in greater quantity when their price rises.
Price as a Determinant of Demand
When price of a good or service increases, quantity demanded decreases.
Consumer Income as a Determinant of Demand
As the income of consumers increases demand for normal goods increase.
Prices of Other Goods and Services as a Determinant of Demand
Substitute goods mean that a price increase in one good will lead to an increase in demand of another.
Complementary goods mean that a price decrease in one good will lead to an increase in demand of another.
Consumer Tastes or Fashion as a Determinant of Demand
Consumer tastes and demand for fashionable products changes regularly, often manipulated by advertising.
Other Factors as Determinants of Demand
Variety of other factors have an impact on demand such as population changes, advertising and the level of competition in the market.
Derived Demand Definition
The demand for a factor of production that results from the demand fro the product it is used to make.
