Introduction to Demand

james liew
Mind Map by james liew, updated more than 1 year ago
james liew
Created by james liew about 4 years ago
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Leaving Certificate Economics Mind Map on Introduction to Demand, created by james liew on 02/08/2016.
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Introduction to Demand
1 Demand is the number of units of goods a consumer will buy at various prices
2 The Law of Demand states that an increase in price leads to a decrease in quantity demanded or a decrease in price leads to an increase in quantity demanded
3 Other Types of Demand
3.1 Effective Demand

Annotations:

  • Consumers must be willing to buy and be capable of paying the price set by the supplier. It is demand backed by the necessary purchasing power.
3.2 Derived Demand

Annotations:

  • Derived demand occurs when one commodity is an essential part of another commodity and it is demanded not for its own sake. e.g. steel and cars.
3.3 Composite Demand

Annotations:

  • Composite demand occurs when a commodity is required for a number of different uses. e.g. sugar
3.4 Joint Demand

Annotations:

  • Joint demand occurs when the demand for one commodity is joined with the demand for another. Also called complementary goods. e.g. petrol and cars.
4 Movement or a Shift in a Demand Curve
4.1 A shift in the demand curve is caused by a change in any non-price determinant of demand
4.2 A movement in the demand curve is caused by a change in the price of the good itself
5 Factors Affecting the Demand For a Good
5.1 Its own price
5.2 Price of other Goods
5.2.1 Substitute goods
5.2.2 Complementary Goods
5.3 Level of Income

Annotations:

  • A rise in income causes more normal goods to be demanded, while a fall in income leads to more inferior goods to be demanded.
5.4 Consumer Expectations
5.5 Consumer Tastes
5.6 Unplanned Factors

Annotations:

  • e.g. if there is a sudden heat wave, there would be an increase in the quantity demanded for sunscreen.
5.7 Government Regulations

Annotations:

  • e.g. the plastic bad levy is aimed to reduce consumption of plastic bags. The smoking ban is aimed at curtailing tobacco consumption
6 Exceptions to the Law of Demand
6.1 Giffen Goods

Annotations:

  • Giffen Goods are goods with a positive price effect, i.e. more is bought as the price rises and less is bought as price falls
6.1.1 Bread, rice and potatoes
6.2 Snob Items

Annotations:

  • Some commodities are attractive to some buyers because of their exclusiveness or high price. A rise in price makes them more exclusive.
6.2.1 Yachts, sport cars and designer clothes
6.3 Speculative Goods

Annotations:

  • e.g. if a person is considering buying stocks and shares, the possibility that prices are likely to be even higher in the future will stimulate and probably increase quantity demanded at current prices
6.4 Addictive Goods

Annotations:

  • Even when the price of the commodity increases, they will probably continue to purchase these goods and their demand for the commodity may actually increase because of their addiction.
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