Competitive Demand Flashcards
What is demand ?
The quantity consumers are willing and able to buy at different prices in a given period of time.
What is the difference between individual and market demand?
Individual demand is the willingness and ability of one consumer to buy a product. A market is made up of many consumers. A market demand is the total amount of goods all consumers are willing and able to buy.
What is the relationship between price and demand?
For almost all goods if price falls demand rises. There’s an inverse relationship between price and quantity demand.
Why do demand curves slope downwards?
More is usually demanded as price falls because:
Income effect-when price falls consumer can maintain current consumption for less expenditure
Substitution effect-when the price falls the product is relatively cheaper than a substitute so people switch from the good in competitive demand to this product.
What causes a movement along the demand curve?
Movements along the curve are in response to changes in price.
What is an extension in demand?
It’s the increase in quantity demanded as a price of a product falls.
What is the contraction in demand?
A decrease in the quantity demanded as price of a product increases
What factors cause a shift in the demand curve?
Income Competition Scarcity Consumer taste Inflation etc.
What is a disposable income?
The income left after paying direct taxes and receiving state benefits.
How do interest rates affect income?
A rise in income rates reduces the amount of income for consumers with depts.
however higher interest payments on savings increase income of savers.
What is an interest rate?
The sum charged for borrowing money, as a percentage per annum.
What are normal goods?
Products for which an increase in income leads to an increase in demand.
What are inferior goods?
Products which an increase in income reduces demand for that product
What are substitutes?
An alternative a consumer can buy to satisfy a given want
Rival products in competitive demand.
What are complements?
It’s,s consumers use together as the use of one requires the other
Compelemets are in joint demand
