Law of Demand Flashcards
As price increases, quality demanded decreases
As price decreases, quality demanded increases
Contraction in demand
When selling price increases and quantity demanded decreases
Expansion in demand
When price decreases, and quantity demanded increases
Favorable Shift in Demand
Right shift, when a non-price factor increases quantity demanded at any given price
Unfavorable shift in demand
Left shift, when a non-price factor decreased quantity demanded at any given price
The income effect
As g+s become more expensive, they take up a larger proportion of income to buy. This means they become less affordable for most, leading to a contraction in demand. This can be affected by disposable income levels
The substitution effect
As g+s become more expensive, consumers look to substitute items which become relatively cheaper. This means demand contracts for the original product.
