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Description
Flashcards by Tara Pugal, updated more than 1 year ago
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Created by Tara Pugal
over 8 years ago
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| Question | Answer |
| Define demand | the quantity of a good/service consumers are willing and able to buy at a given price in a given time period |
| Define utility | the individual demand at a certain value we place on a product usually linked to usefulness or enjoyment |
| Define effective demand | when a desire to buy a product is backed up by an ability to pay for it |
| Define derived demand | the demand for a factor of production used to produce another good/service |
| What is an example of derived demand? | steel: strongly linked to the market demand for cars and construction of new buildings |
| What is the law of demand? | inverse relationship between price of a good and demand for it 1. if prices fall, demand rises 2. if prices rise, demand falls |
| What does the demand curve show? | the relationship between the price of an item and the quantity demanded over a period of time |
| What is the income effect? | when the P of a good falls because the consumer can maintain the same C for less expenditure (provided the good is a normal, some of the resulting ↑Y is used to buy the product) ↓P = ↑Y = ↑D |
| As ↓P, a consumers.. (3) | willingness to pay ↑ opportunity cost of purchasing ↓ switches away from rival products |
| What are some conditions of demand? (6) | changing P of substitutes (competitive D) changing P of complements (joint D) changes in consumers Y ir effects of advertising and marketing seasonal factors |
| What is marginal utility? | the change in satisfaction from consuming one extra unit of a good or service |
| What is the law of diminishing returns? | marginal utility decreases as more units are consumed |
| Why is the D curve downward sloping? | because after a certain point, marginal utility will start to fall (diminish) |
| What is seasonal D? | seasonality refers to fluctuations in D related to months of the year |
| What is an example of seasonal D? | ↑D for ice cream in summer |
| What are social factors of D? (3) | awareness (e.g. health risks) social norms social pressures |
| What are emotional factors of D? (2) | times of insecurity strong emotional attachment |
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