The determinants of the demand for goods and services Flashcards
What is demand?
The quantity that purchasers are willing and able to buy at a given price in a given period of time.
What is the basic law of demand?
That demand varies inversely with price- lower prices make products more affordable for consumers.
What is effective demand?
When demand for a product is backed up by a willingness and ability to pay the market price.
What do changes in the market price do to demand curves?
Causes a movement along.
- higher price leads to a contraction of quantity demanded
- lower price leads to an expansion of quantity demanded
What factors causes a shift in the demand curve?
- Substitutes
- Complements
- Income variation
- Distribution change
- Advertising + marketing
- Interest rates and demand
- Population
- Seasons
- Social + Emotional
What is derived demand?
Demand for a factor of production used to produce another good or service
What is composite demand?
Where goods have more than one use- an increase in the demand for one product leads to a fall in supply of the other
What is total utility?
Total satisfaction from a given level of consumption
What is marginal utility?
Change in satisfaction from consuming an extra unit
What is ceteris paribus?
All other things being equal?
What causes a contraction or an expansion along the demand curve?
Changes in price
Contraction- higher price
Expansion- lower price
What causes a outward shift or an inward shift on demand?
Non-Price
What will an increase in income do to demand?
Increase it
What are substitutes?
Goods that are in competitive demand (eg butter and margarine)
What are complements?
Goods that are in joint demand (eg games consoles and games)
