chapter 7 - demand Flashcards
(25 cards)
What is demand?
The quantity of a good or service that consumers are willing and able to buy at a given price in a given time period
What is effective demand?
Demand backed by the ability and willingness to pay
State the Law of Demand.
As the price of a good falls, the quantity demanded increases, ceteris paribus
What does “ceteris paribus” mean?
All other things being equal
What is a demand curve?
A graph showing the relationship between price and quantity demanded
What is the typical slope of a demand curve?
Downward-sloping from left to right
What causes a movement along the demand curve?
A change in the price or the good itself
What causes a shift in the demand curve?
A change in non-price factors, such as income or tastes
Name two non-price factors that affect demand.
Income and consumer tastes/preferences
What happens to demand for a normal good if income increases?
Demand increases (shifts right)
What is an inferior good?
A good for which demand decreases when income increases
Give an example of an inferior good.
Instant noodles
What is a substitute good?
A good that can replace another good in consumption
What happens to the demand for a good if the price of its substitute rises?
Demand for the good increases
What is a complementary good?
A good that is used together with another good
What happens to the demand for a good if the price of its complement rises?
Demand for the good decreases
What is a change in quantity demanded?
A movement along the demand curve due to a change in price
What is a change in demand?
A shift of the demand curve due to non-price factors
How does advertising affect demand?
It can increase demand by influencing consumer tastes
What is the difference between individual and market demand?
Individual demand is for one consumer, market demand is the total of all consumers
What is a demand schedule?
A table showing different quantities demanded at different prices
How does population size affect market demand?
A larger population increases market demand
What effect does future expectations have on current demand?
If the prices are expected to rise, current demand may increase
What does the term “willing and able to buy” imply in the definition of demand?
Consumers must both want the product and have the means to purchase it
