Market Demand Flashcards
Market
Where buyers and sellers combine to exchange G/S
Demand
The quantity of G/S a consumer is willing and able to buy at each and every price level
Effective Demand
If demand for a product is backed up by a willingness and ability to pay the market price becomes realised
Derived Demand
When demand for a G/S comes from demand for another G/S. For example a windscreen on a car
Law of Demand
There is an inverse real relationship between price and demand
Total Utility
The total satisfaction from a given level of consumption
Marginal Utility
The change of satisfaction from consuming an extra unit
Diminishing market utility
The more of a G/S that a person consumes the lower marginal utility
Non price determinants of demand (7)
Population
Advertisement
Substitution
Income
Fashion
Interest rates
Compliments
Normal Goods
Demand will increase when income increases. For example Heinz Beans
Inferior Goods
Demand will increase when income falls. For example Tesco Beans
Ceteris Paribus Assumption
Economists assume all factors are constant except price, this allows us to isolate 1 variable
Income effect
A fall in price increases real income, this allows people to buy more and this leads to a rise in demand for normal goods
Substitution effect
A fall in the price of Coke makes it relatively cheaper compared to Pepsi. Some consumers will switch to Coke and it will lead to higher demand.
Social factors shifting the demand curve
Pressures: Trending Items
Awareness: Health risks of smoking
Norms: Change in behaviour
