Recap + Demand Flashcards
What’s the economic problem?
There’s a scarce amount of resources and unlimited wants.
What’s opportunity cost?
The next best alternative foregone when it comes to choice.
What’s one assumption when we speak abut behavioural economics?
That consumers are rational - they seek to maximise utility.
What’s demand?
The amount (quantity) of a good/service that customers are willing to buy at a given time and price level.
Name 3 types of demand
- Effective, latent and derived
What’s effective demand?
When a desire to buy something is backed by the ability to pay.
Draw a demand curve
- Y axis is price
- X axis is quantity
- Demand curve labelled D1, D2…
- P1
- Q1
- Equilibrium
What’s diminishing marginal utility?
The marginal decrease of consumer happiness from each consecutive consumption of a good/service.
What’s the law of demand?
Price up = demand down
Price down = demand up
What’s it called when demand rises?
An expansion.
What’s it called when demand falls?
A contraction.
What causes a shift in demand?
Anything else aside from a change in price.
- Increase in income
- Increase in advertising
- Change in price of substitute goods
