Topic 6: Demand Flashcards
Demand
The quantity of a good or service that consumers choose to buy at any possible price in a given period
Ceteris paribus
All factors being equal
What does a rise in price to do the demand curve
Contraction of demand
What does a fall in price to do the demand curve
An extension of demand
What is an extension and contraction in demand based on
- the substitution effect
- the income effect
The substitution effect
When there is a rise in price the consumer(who’s income remains the same) will tend to buy more of a relatively lower-priced good and less of a higher priced one
The income effect
This is the effect of a change in real income on the quantity demanded, with relative prices unchanged
Factors which can cause a shift in the whole demand curve
P: population L:law A: advertising and promotion S: substitutes T: tastes/preferences/fashion can vary I: real income C: complements
What occurs when there’s an increase in demand on the demand curve?
What occurs when there’s a decrease in demand on the demand curve?
Shifts to the right
Shifts to the left
Inferior good
Cheapest and popular alternative product
Disposable income
When tax has been deducted from your salary you are left with disposable income
Complements (products)
Products which consumers tend to buy together
Law of demand
Law that states that there is an inverse relationship between quantity demanded and the price of a good or service, Ceteris paribus
How does advertising affect demand How do substitutes affect demand How does income affect demand How do complements affect demand How do Quality affect demand How does the population affect demand
- advertising can increase brand loyalty to the goods&increase demand
- An increase in the price of substitutes will cause an increase in demand for a good
- ^in disposable income>^D as consumers can afford more goods
- A fall in the price of complements will cause an increase in demand
- Increase in quality>^D
- high population>^D
