Micro - Demand ✔️ Flashcards
Movements Along a demand curve
A movement will occur on a demand curve when the price changes, if the price goes up then there will be a shift up the curve. If the price went down then there will be a shift down the curve.
Shifts in the demand curve
There are two types of shifts, a left shift and right shift.
When the curve shifts left it shows that there is a drop in demand showing that less is being sold
When the curve shifts right it shows that there is greater demand showing more being sold
State and explain the factors that may cause a shift to the right in a demand curve (Increase in demand)
Changes in real incomes - As incomes increase there is likely to be an increase in consumption. This is due to the fact that consumers can now afford to buy more goods/services than they used to.
Changes in tastes and fashions - As a good becomes fashionable it will be more desirable.
Advertising and branding - Increased spending on advertising will increase the likelihood of more people finding out about the good/service. This will also help to create a stronger brand.
Changes in the price of substitutes and complementary goods - An increase in the price of substitute goods will cause the demand for them to decrease. In contrast to this, an increase in the price of complementary goods will decrease the demand for the business’s good.
Changes in size and age distribution of the population - An increase in the size of population will result in an increase in demand for goods/services within the economy. This is due to the fact that there will be more people that are buying goods/services.
Weather -The demand for some goods/services can be derived from the weather. For example, on a sunny day there is likely to be a much greater demand for ice cream.
State and explain the factors that may cause a shift to the left on a demand curve (fall in demand)
A decrease in consumer income: When consumers’ incomes decrease, they may not be able to afford as much of a good or service as they previously could, leading to a decrease in demand.
An increase in the price of a substitute good or service: If the price of a substitute good or service increases, it may become more attractive to consumers, leading them to switch to the substitute and causing a decrease in demand for the original good or service.
A change in consumer tastes or preferences: If consumer tastes or preferences change, they may no longer have the same level of demand for a certain good or service.
An increase in the overall level of taxes on the good or service: Increase in taxes also lead to a increase in prices and decrease the affordability for consumer leading to decrease in demand
A decrease in population: If there are fewer people in a given area, there may be less overall demand for goods and services in that area.
Availability of more information: If more negative information becomes available about a good or service, it can lead to a decrease in consumer confidence and a decrease in demand.
Government Regulations or policies : If goverment bring policies which restrict production or sales of certain goods and services, it will affect the demand of that particular good or service.
Diminishing marginal utility
Decreasing satisfaction or usefulness as additional units of a product are acquired/consumed
