1.3 demand

law of demand

= prices increase lead to less consumers + a decrease leads to more consumers

define commodity + give examples

a basic good/raw material that can be bought, sold or traded in commerce, typically interchangeable with other goods of the same type

→gold→iron→oil→sugar→wheat

define individual demand

the quantity of a good or service that one consumer is willing and able to buy at different prices over a given period of time

define market demand

the total quantity of a good or service that all consumers are willing and able to buy at different prices over a given period of time

provide an example of market demand

imagine there are 100 consumers in the market.

At £3 per coffee:

• You demand 2

• Consumer B demands 3

• Consumer C demands 1

• etc.

If all 100 consumers together demand 250 coffees per week, then:

Market demand = 250 coffees per week at £3.

Market demand = sum of all individual demand.

provide an example for individual demand

imagine you are a consumer buying coffee.

at £3 per coffee, you are willing and able to buy 2 coffees per week.

that's your individual demand — the demand of one consumer.

describe the relationship between demand curve + MU

• the demand curve slopes downwards, along with the MU

• this is because as the price falls people are willing to buy more

• diminishing utility occurs

• when MU is low, consumers only will to pay a lower price, so the quantity demanded falls at higher prices

P A S I F I C

Population

Advertising

Substitutes

Interest rates

Fashion trends

Income

Complementary goods

write at least 4 factors causing demand curves to shift

you could’ve mentioned:

→advertising + branding

→expectations of future prices/income

→income

→prices of substitutes (substitutes are goods that can be used instead of each other)

→prices of complements (goods that are consumed together)

→tastes + preferences

→population/number of consumers

eod + cod

both are movements along the same demand curve caused by a change in the good’s own price

which demand is a fall in price that causes quantity demanded to increase?

expansion

define contraction of demand

• a rise in prices causes quantity demanded to decrease

which demand refers to one good having multiple uses?

composite

give examples of effective demand

→buying a car

define effective demand

demand backed by willingness and ability to pay

give examples of joint demands

→fish + chips

→smartphones + apps

→flight + taxis

which demand refers to demand coming from another demand for another good/service?

derived

give examples of derived demand

→labour

→new homes increases the demand for steel

define joint demand

goods are demanded together

give examples of composite demand

→butter

→milk chocolate

→cheese

which good describes goods for which demand decreases when income increases?

inferior

give example of inferior goods

→supermarket value-brand food

→public transport

define giffen goods

inferior goods for which demand increases when their price increases

give example of giffen goods

→staple food such as rice or bread

define normal goods

goods for which demand increases when consumer income decreases

give example of normal goods

→restaurant meals

→holidays

define luxury goods

expensive, non-essenial items that people buy to show wealth or status when they have extra money

examples of luxury goods

→luxury handbags

→luxury watches

define veblen goods

a luxury item where demand goes up as the price goes up,which breaks normal economics rules

give examples of veblen goods

→luxury holidays

→luxury watches