Untitled Flashcard Set

What is demand?

Demand is the quantity of a good or service that consumers are willing and able to buy at a given price.

What are the main non-price factors that influence demand?

Income, prices of substitutes, prices of complements, trends and fashion, population/demographics.

How does an increase in income affect the demand for normal goods and inferior goods?

Demand for normal goods increases while demand for inferior goods decreases.

What happens to demand for a substitute when its price rises?

Demand for the substitute increases.

What are complements in terms of demand?

Complements are goods that are used together, such as printers and ink.

What is the effect of a successful marketing campaign on demand?

It causes a right shift of demand for the product.

What is the equilibrium price?

The price where quantity demanded equals quantity supplied.

What occurs when there is excess demand?

There is a price below equilibrium, leading to consumers competing with each other and firms raising prices.

What leads to a left shift of the demand curve?

Factors such as increased taxes or a bad economic outlook can lead to a left shift of demand.

What is the law of demand?

Price and quantity demanded are inversely related; if price rises, quantity demanded falls, and vice versa.

What is price elasticity of demand (PED)?

PED measures how responsive the quantity demanded of a good or service is to a change in its price.

What type of goods have elastic demand?

Luxury goods, branded soft drinks, holidays have elastic demand.

What is the relationship between supply and production costs?

Higher costs of production lead to lower supply, while lower costs lead to higher supply.

What is the effect of technology on supply?

Improved technology increases productivity and supply.

What happens to equilibrium price when demand increases?

The equilibrium price and quantity both increase.

How does a fall in prices affect demand for complementary goods?

A price fall can increase quantity demanded, which increases demand for complementary goods.

What does inelastic supply mean?

A large change in price results in a small change in quantity supplied.

What factors can cause a shift of the supply curve?

Changes in production costs, technology, number of firms, and government policies.

What is market demand?

The total demand for a product from all potential customers in the market.

How can a price rise affect demand for substitutes?

A price rise for one good can increase demand for its substitutes.

What are perishable goods' impact on supply elasticity?

Perishable goods generally have inelastic supply.

What implications does PED have for producers?

Understanding PED helps producers make pricing decisions to maximize revenue.

What occurs when the price of a good is expected to rise in the future?

Quantity demanded increases now as consumers buy to stockpile at a cheaper price.

What is the difference between individual demand and market demand?

Individual demand is the demand from one person; market demand is the total of all individuals' demands.

What causes a movement along the demand curve?

A change in price causes a movement along the demand curve.

What is the effect of a new equilibrium formed by a change in supply?

The new equilibrium occurs where the new supply curve intersects with the demand curve.