Demand And Supply Flashcards
What is demand?
The ability and willingness of consumers to buy a good or service at a given price
What is market demand?
All the individual demand added together at a given price
What is individual demand?
The demand of one person for a product at a given price
What is the law of demand?
It states that as a price rises, consumer’s willingness and ability to pay falls
What is utility?
The satisfaction gained from consuming goods or services
What is total utility?
The total satisfaction a consumer will get from consuming a product over a period of time
What is marginal utility?
The satisfaction gained from consuming an extra unit of a product
What is extension of demand?
The increase in the quantity demanded in demand (demand curve moves right)
What is contraction of demand?
The decrease in the quantity demanded in demand (demand curve moves left)
Why do demand curves slope downwards? (3)
- Diminishing marginal utility
- Income effect
- Substitution effect
What is diminishing marginal utility?
As you can consume more of a good, the extra satisfaction you get from one unit begins to fall. The more we have of a good the more we are willing to pay to get one more unit of it
What is the income effect?
If you reduce the price of a product, then more people can afford-quantity demanded goes up
What is the substitution effect?
If the price of a product increases, then consumers will switch demand to a substitute item
What happens to a demand curve when the price changes?
There will be a movement along the demand curve
What are factors causing a shift in demand?
Advertising, income, population, price of other goods (complementary or substitutes), weather and taste and fashion
