The Determinants of The Demand for Goods and Services Flashcards
What is a market?
A market is a voluntary meeting of buyers and sellers
What is a competitive market?
A competitive market is when there a large number of buyers and sellers that all accept the market price that is set not by individual decisions but by the interaction of all those taking part in the market
What does a demand curve show?
Shows the relationship between price and quantity demanded
What causes shifts in the demand curve?
A change in the factors of production
What is market demand?
Market demand is just the sum of the demand of all the consumers in the market
What happens to demand if price falls?
The law of demand states that as a good’s price falls more is demanded.
What is a normal good?
A normal good is a good for which demand increases as income rises and demand decreases as income falls
What is an inferior good?
Where demand decreases as incomes increase
What is a luxury good?
Where demand decreases as income decreases
What affects demand?
The price of the good Consumer income Prices of competition Tastes and fashion Other factors e.g. population change and advertisement
What factors affect a shift in the demand curve?
Changes in price or availability of substitutes
Changes in price or availability of complements
Changes in income
Changes in taste
What are the conditions of demand?
Prices of substitute goods Prices of complementary goods Personal disposable income Tastes and preferences Population size, which influences total market size
What causes a rightward shift in the demand curve?
Increase in the price of substitute goods
Decrease in price of complementary goods
Increase in personal disposable income
A successful advertising campaign making people think more favourably about the good
Increase in population size
