Micro - Topic 2 - Demand Flashcards
Define demand
The quantity of a good/ service that the consumer is willing and able to buy at a given price over a given period of time
Define the law of demand
A law that states that there is an inverse relationship between quantity demanded and the price of a good or service assuming ceteris paribus
Real income effect
Price decrease
Real income increase
Consumers buy mroe
Substitution effect
Price decrease
Good or service is cheaper relative to other goods
It’s substituted for other goods
PASIFIC?
Factors that affect the demand of a good/ service
P = Polulation
A = Advertisement
S = Substitute goods
I = Income
F = Fashion and tastes
I = Interest rates
C = Complementary goods
It ignores Ceteris Paribus
Define Ceteris Paribus
Define normal good
One where the quantity demanded decreases in response to an increase in consumer incomes
E.G
Foreign holidays
Define inferior good
One where the quantity demanced decreases in response to an increase in consumer incomes
E.G
Tesco Value products
Define substitutes
2 goods are said to be substitutes if the demand for one good is likely to rise if the price of the other good rises
E.G
Coke and Pepsi
Define complements
2 goods are said to be complements if an increase in the price of one good causes the demand for the other good to fall
E.G
Strawberries and cream
Real disposable income
Income reamining after taxes and government charges have been paid. It’s the post tax and benefit income available to households
Joint demand
Demand for good is interdependant (i.e. go together)
E.G
Cars and petrol
Competative demand
Demand for products that are competing against each other
E.G
Coke and pepsi
Derived demand
Demand for a product is dependant upon the other product
