Miss austin mini quiz demand

ceteris paribus

To simplify analysis, economists isolate the

relationship between two variables by assuming

ceteris paribus - all other influencing factors are

held constant

Complements

Two complementary goods are said to be in joint

demand

Composite demand

Where goods or services have more than one use

so that an increase in the demand for one product

leads to a fall in supply of the other. E.g. milk

which can be used for cheese, yoghurts, cream,

butter and other products. If more milk is used for

manufacturing cheese, ceteris paribus there is

less available for butter

Conspicuous

consumption

Conspicuous consumption is consumption

designed to impress others rather than something

that is wanted for its own sake

Consumer surplus

Consumer surplus is the difference between the

total amount that consumers are willing and able

to pay for a good or service (indicated by the

demand curve) and the total amount that they

actually pay (the market price)

Cyclical demand

Demand that change in a regular way over time

depending on the part of the economic (business)

cycle that a country is in or the time of year

Demand

Quantity of a good or service that consumers are

willing and able to buy at a given price in a given

time period

Demand curve

A demand curve shows the relationship between

the price of an item and the quantity demanded

over a period of time. For normal goods, more of a

product will be demanded as the price falls

Derived demand

Derived demand occurs when the demand for a

particular product depends on the demand for

another product or activity

Effective demand

Demand in economics must be effective. Only

when a consumers desire to buy a product is

backed up by an ability to pay for it do we speak

of demand

Excess demand

The difference between the quantity supplied and

the higher quantity demanded when price is set

below the equilibrium price. This will result in

queuing and an upward pressure on price

Latent demand

Latent demand exists when there is willingness to

purchase a good or service, but where the

consumer lacks the purchasing power to be able

to afford the product

Law of demand

The law of demand is that there is an inverse

relationship between the price of a good and

demand

Normal goods

Normal goods have a positive income elasticity of

demand. Necessities have an income elasticity of

demand of between 0 and +1. Luxuries have

income elasticity; +1 demand rises more than

proportionate to a change in income

Perverse demand curve

A perverse demand curve is one which slopes

upwards from left to right. Therefore an increase

in price leads to an increase in demand. This may

happen where goods are strongly affected by

price expectations or in the case of Giffen goods

Asking price

The price at which a security, commodity or

currency is offered for sale on the market -

generally the lowest price the seller will accept