Theory of Demand Flashcards
What is demand?
Demand means desire for a commodity backed by purchasing power
The income demand curve is positively sloped in case of …………………. goods
normal goods
The income demand curve is negatively sloped in case of ……………….. goods
inferior
The income demand curve is ……………….. in case of normal goods
positively sloped
The income demand curve is ………………….. in case of inferior goods
negatively sloped
Cross demand curve for substitute goods is …………….
positively sloped
Cross demand curve for complementary goods is …………….
negatively sloped
Cross demand curve for ………………… goods is positively sloped
substitute goods
Cross demand curve for …………………… goods is negatively sloped
complementary goods
When any commodity or service is demanded for alternative uses, it’s called ……………………………….
Composite demand
If any commodity is demanded for direct consumption, it is called ……………….
Direct Demand
The demand for the substitute goods in the market is called …………………………
Competitive demand
When the demand for a commodity s derived form the demand for other commodities, it is called ………………….
Derived Demand
When desire for a commodity is not backed by purchasing power, it is …………………….. demand
Notional or ex ante (planned) demand
When desire for a commodity is backed by the required purchasing power, it is …………………….. demand
Effective or ex post (actual) demand
………….. and …………. determine the price of a commodity or a service in the market
demand ad supply
effective demand = ………………….. + ………………………….
desire for a commodity + purchasing power
For Inferior goods, when …………. increases ………………….. decreases and vice versa
income, demands
For ………………… when income increases demand decreases and vice versa
Inferior
For normal goods, when ……………… increases, …………………….. also increases and vice versa
income, demand
For …………….. goods, when income increases,
demand increases and vice versa
Normal
A demand curve is always …………………… , …………………. and …………………….. to the origin
negative, downward sloping and concave to the origin
What’re the causes for the downward sloping of the demand curve
Income Effect
Substitution Effect
Law of Diminishing Marginal Utility
If playing golf is habit among successful businessmen, then the demand for golf ball rises, a businessman may increase his demand for golf balls in order to show that he is a successful businessman. This is an example of ………………….. effect
bandwagon effect
When a consumer decreases his purchase of a particular commodity to show that he no longer belongs to a particular social class, it is an example of …………………….. effect
snob effect
O1) When a commodity holds a ……………. position in the consumer’s budget, variations in the price will leave the demand unaffected
insignificant
When demand for a commodity depends on only the income of the consumer, it is …………. demand
income demand
Electricity services being demanded for domestic and industrial use is an example of ………….. demand
Composite demand
Demand for domestic air transport services provided either by Jet airways or by Kingfisher or Indian airlines is an example of ……………….
Competitive Demand
Demand for bread and butter is example of ………….. demand
Direct demand
When a machine producing cotton shirts is demanded as there is a demand for cotton shirts is an example of ……………….
derived demand
Another name for notional or ex ante demand?
wants
Another name for effective demand?
ex-post demand
Effective demand = …………………. + ……………………
OR
Effective demand = …………………. + ……………………
Desire to buy + Purchasing power
OR
Notional or ex-ante demand + Purchasing Power
An increase in the individual income of the consumer, with other things remaining unchanged would lead to …………………………………………..
increase in purchasing power (and vice versa)
Given the money income of the consumer, an increase in the price of the commodity would lead to …………………………………………….
Decrease in the purchasing power (and vice versa)
If a consumer expects the prices of a commodity to rise in the near future, he will purchase …………………… in the present
more of it
If the income distribution moves in favour ……………….., the demand for commodities used by these people will be in demand
the poor people
……………………. of a country also influences the demand
demographic structure or age distribution
Market demand of a commodity means the sum total of all the demand of all the ……………of the market
individuals
Individual demand curve is ………….. whereas market demand curve is ………………..
steeper, flatter
What is the law of demand?
When P↑ D↓
When P↓ D↑
Under …………… effect, when the price of an inferior commodity rises, people cut down their expenses to be able to afford that particular commodity
giffen effect
Who observed the giffen effect?
Sir Robert Giffen
