HL IB Economics 2.1 Demand – Key Vocabulary

Fifteen vocabulary flashcards summarising the core concepts of IB Economics Topic 2.1 Demand, including definitions of demand, its determinants, and related analytical terms.

Demand

The quantity of a good or service that consumers are willing and able to buy at a given price in a given time period.

Effective Demand

Demand backed by the consumer’s ability to pay; if a buyer is willing but cannot afford the good, the demand is not effective.

Demand Curve

A graphical representation showing the relationship between price and quantity demanded, usually drawn as a downward-sloping straight line for ease of analysis.

Law of Demand

States that, ceteris paribus, there is an inverse relationship between price and quantity demanded: as price rises, quantity demanded falls and vice versa.

Market Demand

The total demand for a good or service found by summing all individual consumers’ quantities demanded at each price level.

Income Effect

The change in consumers’ purchasing power caused by a price change; a price fall raises real income, increasing quantity demanded, while a price rise lowers real income, reducing quantity demanded.

Substitution Effect

Consumers’ tendency to replace a relatively more expensive good with a cheaper alternative that offers similar satisfaction when price changes.

Law of Diminishing Marginal Utility

Principle stating that the additional satisfaction (marginal utility) gained from consuming extra units of a good declines as more units are consumed.

Movement Along the Demand Curve

A change in quantity demanded resulting solely from a change in the good’s own price, illustrated as a movement up or down the existing demand curve.

Contraction in Quantity Demanded

A movement up the demand curve caused by a price increase, leading to a lower quantity demanded.

Extension in Quantity Demanded

A movement down the demand curve caused by a price decrease, leading to a higher quantity demanded.

Non-Price Determinants of Demand

Factors other than price that change demand, such as income, tastes, prices of related goods, number of consumers, and future price expectations.

Shift of the Demand Curve

A leftward or rightward movement of the entire demand curve triggered by a change in a non-price determinant, indicating a change in demand at every price level.

Substitute Goods

Products that can be used in place of each other; a price rise in one increases demand for the other, and vice versa.

Complementary Goods

Products consumed together; a price rise in one causes demand for the other to fall, while a price fall in one raises demand for the other.