T1: LS8 - Demand Flashcards
Define Demand.
Demand: refers to the quantity of goods and services which consumers are able and willing to purchase at a given price level over a set period of time.
Where is demand met best
Free economies or market economies
What is the law of demand
This states that with Ceteris paribus, that as the price of a good increases, the demand decreases and vice versa.
What are extensions/ expansions in demand
When the price decreases resulting in an increase in demand but no shift.
What are contractions in demand
This is when as price increases, demand decreases but no shift occurs.
Define substitute goods
Substitute goods: two alternative products which can be replaced by eachother to produce the same function or outcome (interchangeable goods).
How do demand for substitute goods impact eachother
- as one increases, the other good demand decreases
- as the price for one changes (increases), the others demand increases
Define Complimentary goods
Complimentary goods: types of products which are sold together and both help produce a particular function.
How do complimentary goods act to eachother
- work in proportion
- as one demand increases, so does the other
- as one price changes, so does the other
What factors impact demand
P - population
A - age/ advertising
S - substitute price
I - income
F - fashion
I - interest rates/ inflation
C - complement price
Define effective demand
Effective demand: refers to demand in reality where it is those who are able to pay for products along their willingness to buy the product.
Define Market demand
Market demand: the total quantity of G&S which all consumers are able and willing to buy in a market at a given price and time period.
Define cross-demand
Where the change in price for Good X, impacts the demand of good Y.
Define derived demand
Derived demand: when the demand for a G&S occurs due to the demand for an interrelated product. (More oil wanted because of more petrol demand)
Define joint demand
Joint demand: when the demand for one product is directly and positively related to the demand for a related G&S
Define composite demand
Composite demand: where the good provided has multiple uses so as demand changes for one product, the others demands’ are also impacted (milk and yogurt)
