The Determinants Of The Demand For Goods And Services 3.1 Flashcards
What is demand ?
Demand is the quantity of a good or service that consumers are willing and able to buy at a given price during a period of time
What factors can shift the demand curve ?
PIRATES
Population
Income
Related goods
Advertising
Taste and fashions
Expectations
Seasons
How does population shift the demand curve ?
The larger the population, the higher the demand. Changing the structure of the population also affects demand, such as the distribution of different age groups
How does income affect demand ?
If consumers have more disposable income, they’re able to afford more goods, so demand increases. Also a consumers wealth also affects their demand
How do related goods affect demand ?
Related goods are substitutes or compliments. A substitute can replace another good, such as two different brads of tv. If the price of the substitute falls, the quantity demanded of the original good will fall as consumers switch to the cheaper option.
A compliment good is a good that goes with another good, such as strawberries and cream. If the price of strawberries increase, the demand for cream will fall because fewer people will be buying strawberries, and hence fewer people buy cream
How does advertising affect demand ?
This will increase consumer loyalty to the good and increase demand
How do tastes and fashions affect demand ?
The demand curve will shift if consumer tastes change. For example the demand for physical books may fall if consumers start to read e-books
How do expectation affect demand ?
This is of future price changes. If speculators expect the price of shares in a company to increase in the future, demand is likely to increase in the present
How do seasons affect demand ?
Demand changes according to the season. For example, in the summer the demand for ice cream and sun lotion increases
