Video Notes: Demand and Demand Curve

Vocabulary flashcards covering key terms and definitions from the lecture on demand, demand schedules, and demand curves.

Demand

The quantity of a commodity that a consumer is willing and able to buy at each possible price during a given period.

Individual Demand

Quantity of a commodity that a single consumer is willing and able to buy at different prices.

Market Demand

Quantity of a commodity that all consumers are willing and able to buy at different prices.

Determinants of Individual Demand

Factors affecting an individual's demand, including price of the commodity, price of related goods, income, tastes and preferences, and expectations of future price changes.

Price of the Given Commodity

The most important determinant; when price rises, demand falls and when price falls, demand rises.

Price of Related Goods

Two types of related goods that affect demand: substitutes and complements.

Substitute Goods

Goods that can replace each other; when the price of one rises, demand for the other rises.

Complementary Goods

Goods used together; when the price of one rises, demand for the other falls.

Normal Goods

Demand increases when income increases.

Inferior Goods

Demand decreases when income increases.

Tastes and Preferences

If a good becomes more fashionable or preferred, demand increases; if preferences shift away, demand decreases.

Expectations of Future Price Changes

If consumers expect higher prices in the future, current demand increases; if they expect lower prices, current demand decreases.

Change in Quantity Demanded

Demand changes due to own price of the goods, holding other factors constant.

Change in Demand

Demand changes due to factors other than price.

Determinants of Market Demand

Factors affecting market demand, including size and composition of population, distribution of income, and season and weather.

Size and Composition of Population

A bigger population increases demand; a smaller population decreases demand.

Distribution of Income

Equal income leads to more demand; unequal income leads to less demand.

Season and Weather

Demand changes with seasons; e.g., woolen clothing rises in winter and falls in summer.

Demand Schedule

A tabular statement showing various quantities demanded at various prices.

Individual Demand Schedule

A tabular statement showing quantities a single consumer is willing to buy at different prices.

Market Demand Schedule

A tabular statement showing quantities all consumers are willing to buy at different prices; sum of individual schedules.

Demand Curve

A graphical representation of a demand schedule.

Individual Demand Curve

A graphical representation of an individual demand schedule.

Market Demand Curve

A graphical representation of the market demand schedule.

Slope of a Demand Curve

The change in price divided by the change in quantity demanded (ΔP/ΔQ).

Law of Demand

There is an inverse relationship between price and quantity demanded, holding other factors constant.

Assumptions of Law of Demand

Substitute goods' price remains constant, complementary goods' price remains constant, consumer income remains unchanged, tastes remain unchanged, and no expected price change.

Substitution Effect

When price falls, a good becomes cheaper relative to substitutes, increasing its demand.

Law of Diminishing Marginal Utility

As more units are consumed, the extra satisfaction from each additional unit decreases, encouraging purchases at lower prices.

Income Effect

When price falls, the purchase power (real income) increases, enabling more purchases.

Additional Customers

Lower prices attract new buyers who could not afford previously, increasing total demand.

Different Uses

Some goods have multiple uses; lower prices expand uses and increase demand.

Giffen Goods

Inferior goods where higher prices can raise demand due to income effects, e.g., staple foods in low-income areas.

Status Symbol Goods

Goods bought to show off; when their price falls, demand may decrease as they lose prestige.

Fear of Shortage

If a shortage is expected in the future, people may buy more now at higher prices.

Ignorance

Lack of price knowledge can cause people to buy more at higher prices by mistake.

Fashion Related Goods

Goods in fashion may see higher demand even if prices rise.

Necessities of Life

Essential goods with inelastic demand; their demand does not fall significantly with price increases.

Movement Along the Demand Curve

Change in quantity demanded due to a price change while other factors stay constant.

Expansion in Demand

Increase in quantity demanded due to a decrease in price, with a downward movement along the same curve.

Contraction in Demand

Decrease in quantity demanded due to an increase in price, with an upward movement along the same curve.

Increase in Demand

Rise in demand due to favorable changes in other factors at the same price; rightward shift of the demand curve.

Decrease in Demand

Fall in demand due to unfavorable changes in other factors at the same price; leftward shift of the demand curve.

Rightward Shift

Increase in demand; the demand curve shifts to the right.

Leftward Shift

Decrease in demand; the demand curve shifts to the left.

Shift in Demand Curve

A change in demand due to factors other than the own price of the commodity, shown as a shift of the curve.

Change in Demand vs Change in Quantity Demanded

Change in demand is a shift of the curve due to nonprice factors; change in quantity demanded is a movement along the same curve due to price change.