Ch 3 - Demand

Complements

________: goods which have a joint demand as they enhance the satisfaction derived from another good.

Substitutes

________: alternative goods can satisfy the same want and need.

price availability

A change in the ________ of either will have an effect on the demand for complementary goods.

Status quo

________: overwhelming amount of choices.

Demand

________: the quantity of a product which consumers are willing and able to buy.

Complementary goods

________: demand decreases, quality demand decreases.

Substitute goods

________: demand increases, quality demanded decreases.

rationality

Bounded ________: theory that consumers have limited rational decision making driven by cognitive ability, time constraint, and imperfect information.

Effective demand

________: by purchasing power, the purchaser has the money to pay for the product.

**Ineffective demand** 

do not have purchasing power

**Law of demand**

states that as the price of product falls, the quantity demanded will increase

**PINTE**

1. Prices   2. Income   3. Number of buyers    4. Taste/preference  5. Expectations

Methods of decreasing demand

• Income drops

• Substitution falls

• Compliments rises

• Buying discouraged

Methods of increasing demand

• Income rises (normal goods)

• Price of substitution rises

• Price of complementary falls

• Encouraged buying

• Population likely to buy increases