Economics 1.2 demand

What is demand?

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

What is the law of demand

There is an inverse relationship between price and quantity demanded. As price increases, Qd decreases and vice versa

What goes on x axis on demand curve

Quantity

What goes on y axis (top) of demand curve

price

What is put on end of line in demand curve

D

What assumption do we make to understand law of demand

We assume ceteris paribus- all other factors remain unchanged

Explain extension of demand

A movement in quantity/price down the demand curve if quantity demanded has risen

Explain contraction in demand

A movement in quantity/price up the demand curve if quantity demanded has fallen

Why is there a downward slope?

Due to diminishing marginal utility

What is diminishing marginal utility

The value that consumers gain from the last product consumed falls, the greater the number consumed can apply between consumers. Consumers will be less willing to pay

Increase in demand (SIIP) what does S mean

Seasonal

Increase in demand -SIIP what does I mean

Increase in income

Increase in demand -SIIP what does I2 mean

Improvement in convenience

Increase in demand -SIIP what does P mean

Perceived shortage

Decrease in demand- RAP what does r stand for

Reduction in actual/perceived quality

Decrease in demand- RAP what does a stand for

Availability of substitutes

Decrease in demand- RAP what does p stand for

Price of substitutes

What are normal goods

As incomes rise demand for the good or service increases

What are inferior goods

As incomes rise, demand for goods or service decreases

What are luxury goods

As incomes rise, demand for luxury goods rises disproportionately

What is the definition of consumer surplus

The difference between how much buyers are willing to pay for a good and what they actually pay