LS8 - Demand Flashcards

1
Q

What is demand?

A

Demand is the quantity of a good or service purchased at a given price over a given time period

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2
Q

Why do consumers fail to make rational decisions?

A

Consumer Inertia, Behaving Habitually, Consumer Weakness to Computation, Lack of Time, Lack of Information, Lack of Ability to Process Information

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3
Q

What does the law of demand state?

A

As the price of a good increases, quantity demanded decreases; conversely, as the price of good decreases, quantity demanded increases

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4
Q

What does decrease and increase in price result in the demand curve?

A

A decrease in price results in an extension/expansion in demand. We can represent this on a diagram by a movement along a demand curve.
An increase in price results in a contraction in demand. We can represent this on a diagram by movement along a demand curve

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5
Q

What are substitute and complement goods?

A

Substitute goods are two alternative products that could be used for the same purpose
Complement goods are products that are used togehter

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6
Q

What does shortage typically lead to?

A

Shortages typically lead to higher demand

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7
Q

What factors cause a shift in demand?

A

A change in the age structure of the population
Changes in income affect demand, in general an increase in income will lead to a rise in demand
Advertising can affect demand (successful/unsuccessful)
Changes in consumer taste/preferences can affect demand

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8
Q

How to substitute goods affect demand?

A

If consumers are rational and a substitute becomes cheaper, a consumer will switch to this consumer good, so demand for the original good decreases

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9
Q

How does complement goods affect demand?

A

If a complement good is expensive, it decreases the demand for the corresponding complement good

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10
Q

How do changes in the age structure impact demand?

A

As a population grows older, demand on services like healthcare may increase as they require more support

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11
Q

How does income effect demand?

A

An increase in incomes leads to an increase in demand as consumers have a greater disposable income which allows demand to increase

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12
Q

How does advertising effect demand?

A

Successful advertising can increase demand by influencing more people to buy a good or service

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13
Q

How does changes in consumer taste/preferences effect demand?

A

If a certain good or service is preferred over another, the demand for one good or service will decrease, as the other increases

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