Markets (Demand and Supply) Flashcards
Relationship between demand for air travel and for airline pilots, is an example of…
Derived demand
Derived demand
A demand for a commodity/ service which is a consequence of the demand (usually with labour)
If there’s an increase in income for so summers of coca cola by £60/week, what happens to the demand curve?
Shifts right
Factors that decrease demand for coca cola? (Shifts demand curve left)
1) The price of a substitute good is decreased (e.g Pepsi)
2) Less demand for compementary goods (e.g hamburgers)
3) A smaller market
How does the price of the good change the demand curve of the same good?
Price doesn’t shift the demand curve. Movement can only be along the line if price is the only factor which changes.
Substitute goods
Two goods are substitutes if they’re in competitive demand and a consumer considers them to be alternative products.
Example of two substitute goods?
Pepsi and coca cola
Complementary goods
Two goods are complementary if they are joint demand and the consumer uses them in combination.
Example of complementary goods?
Pencils and pencil sharpeners
Demand
The quantity of a good/ service that a consumer is willing and able to purchase at a given time period with a given price of the good.
What is the relationship represented in the demand curve for price and quantity?
An inverse relationship
Ceteris parabus
The assumption that all other components will remain constant. E.g the shifts of the demand curve is only valid if you assume ceteris parabus, so nothing else is contributing to the change.
Inferior goods
Products which are demanded less when income increases. (Negative income elasticity of demand)
Normal goods
Products that increase demand as income increases. (Positive income elasticity of demand)
