Flashcards
2.2: Demand
Cards in this deck (22)
- 1What is a market?A means by which the exchange of goods and services takes place as a result of buyers and sellers being in contact with each other.
- 2What is the meaning of a competitive market?- Composed of large amounts of buyers and sellers
-No individual firm has control over price
-Price is usually determined by the force of demand and supply - 3Define demandThe demand of an individual consumer is the amount of goods and services a consumer is willing and able to price at different possible prices, in a given time period, ceteris paribus.
- 4Define the law of demandThere is a negative causal relationship between price of a good and its quantity demanded over a particular period of time, ceteris paribus.
- 5What are the three reasons as to why there is an inverse relationship between price and quantity demanded?- Income effect
-Substitution effect
-Law of diminishing marginal utility - 6What is the income effect?As prices fall, the purchasing power of consumers increase, so they are able to buy more goods.
- 7What is the substitution effect?As prices fall, the real prices of substitute goods appear to increase, so consumers buy more of the good for which the price has decreased.
- 8Define marginal utility.Is the extra benefit derived from each additional unit consumed. Marginal benefits fall as quantity consumed increases. Because of this, consumers will only be prepared to buy each extra unit of good only if it's price decreases.
- 9Changes in price causes a...- Movement along the curve
- Increase/decrease in QUANTITY demanded - 10What is market demand?Is the combination of all individuals demands for a particular good.
- 11What is a non-price determinant of demand?Are variables other than price that can influence demand.
- 12State the 7 non- price determinants of demand-Income case of normal good
-Income case of inferior good
-Substitute products
-Complimentary products
-Changes in preferences/taste
-Demographic/size of market
-Expectation of future prices - 13Describe the income case of normal goods.A good is a normal good when demand increases when there has been an increase in consumer income.
E.g. Television, holiday trips - 14Describe income case of inferior goods.An inferior good is when demand decreases as income of consumer increases. E.g. Second hand cars, public transport
- 15Describe substitute goods and its effects.-Substitute goods are two goods that satisfy a similar need. E.g. Butter and margarine.
-If the price of butter rises, the demand for butter will decrease and cause an increase in the demand for margarine. - 16Describe complimentary goods and its effects.- A complimentary good are two goods that are usually consumed together. E.g. Coffee and milk
- An increase in the price of coffee will cause a decrease in demand for coffee, but also cause a decrease in the demand for milk, as they are usually consumed together. - 17Describe the changes in preferences and tastes.-If preferences and tastes changes in favour of a product, then the demand curve will shift to the right.
-If preferences and tastes changes against the product, then demand curve will shift to the left. - 18Describe demographic/size of populationAn increase in the number of buyers will shift the curve to the right.
A decrease in the number of buyers will shift curve to left. - 19Define what is meany by expectation of future prices-If consumers expect the price of a good to increase, then demand for that good will increase now since they want to buy it while it is still relatively cheap, and vice versa.
- 20A change in non price determinant of demand causes...- A shift in the demand curve
- Increase/decrease in DEMAND - 21State 3 things about this graph- Movement along the demand curve
- Price related
-Change in QUANTITY demanded - 22State 3 things about this graph- Shift of demand curve
- Caused by non-price determinant
- Causes a CHANGE in demand
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- International Baccalaureate Economics (Chapter 2: Competitive markets: Demand and Supply) Flashcards on 2.2: Demand , created by Jasmine Wells on 04/10/2015.
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- Jasmine Wells
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