Unit 2.2 The allocation of resources

complementary good

complementary good

A rise in the price of a(n) ________ will reduce the demand for the particular product, causing the demand curve to shift to the left; and vice versa.

demand curve

A rise in the price of a substitute causes a rise in the demand for the product, causing the ________ to shift to the right; and vice versa.

Demand

________ is the want and willingness of consumers to buy a good or services at a given price.Effective demand is where the willingness to buy is backed by the ability to pay.

Degree of Advertising

________: when a good is very effectively advertised (Coke and Pepsi are good examples), its demand rises, causing a shift to the right.

2.3

DEMAND

Consumer incomes

a rise in consumers incomes increases demand, causing a shift to right

Taxes on incomes

a rise in tax on incomes means less demand, causing a shift to the left; and vice versa

Price of substitutes

Substitutes are goods that can be used instead of a particular product

Example

tea and coffee are substitutes (they are used for similar purposes)

Price of complements

Complements are goods that are used along with another product

consumer tastes and fashion

the demand for DVDs have fallen since the advent of streaming services like Netflix, which has caused the demand curve for DVDs to shift to the left

Advertising

degree of ___: when a good is very effectively advertised (Coke and Pepsi are good examples), its demand rises, causing a shift to the right

population

change in ___: A rise in the population will raise demand, and vice versa