Demand Flashcards
(9 cards)
What is effective demand?
Effective demand is demand backed up by necessary the purchasing power (never a wish or desire).
What is the Law of Demand?
The Law of Demand states that the higher the price of a good, the smaller the quantity demanded of that good.
Do goods which obey the Law of Demand have a negative or positive relationship?
They have a negative (inverse) relationship.
What is a Demand Schedule?
When the quantity, which is bought at each price, is displayed in the form of a table.
List 3 goods which break the Law of Demand.
1) Giffen Goods 2) Snob Goods 3) Good of Addiction
What is a Giffen Good?
A Giffen Good is a necessity that represents a large portion of of the expenditure of low income families.
What is a snob good?
Snob goods are goods which are desired by the consumer because of their expensive price or exclusive brand name. There is a perceived link between the quality of the good and its price. These goods are sometimes referred to as goods of conspicuous consumption.
How do Giffen Goods break the Law of Demand?
Poorer families spend most of their income on necessities like bread, and if the price of bread rises, consumers have less money to spend on other types of goods and so they assign their income to these goods. Therefor if the price of a Giffen Good rises, so does the demand.
How do snob goods break the Law of Demand?
As the price of these goods increase they become more exclusive and desirable to high income consumers and therefor demand for the good rises.
