Demand

What causes a movement along the demand curve?

A price change.

Why caused a movement along the demand curve to the left?

A price rise

What is the price increase called?

a contradiction of demand assuming ceteris paribus

What is a contradiction?

A fall in the quantity demanded.

What causes a movement along the demand curve to he right?

A price fall. (extension)

What is an extension?

Rise in quantity demand assuming ceteris paribus

What is the effect of changes in any of the factors other than price?

the demand curve shifts position

e.g if there is a change in income, this will affect the quanity demanded at any given price

What does an increase in demand mean?

the quantity demanded will rise at any given price causing the demand curve to shift to the right.

What does a fall in demand mean?

the quantity demanded will fall at any given price causing the demand curve to shift to the left.

What Is disposable income (Yd)?

income after taxes have been paid and benefits received.

what is discretionary income?

disposable income less bills.

What may cause the curve to shift?

changes in real incomew

What factors could cause a rise in disposable income?

• lower income tax or national insurance

• increased salary

• increased benefits

How does achange in tastes and fashion change demand?

demand will increase if a demand becomes more fashionable or if there is a successful advertising campaign or a health scare may cause demand to fall.

e.g sanitiser during covid

What is a substitute?

Substitutes are goods that can be consumed as an alternative. They are in competitivedemand. For example, a substitute for tea could be coffee. If the price of tea increases, the demand for coffee will increase.

What are complements?

Complements are goods that are consumed together and are said to be in joint demand. For example, strawberries and cream. If the price of strawberries increases the demand for cream s likely to decrease

What is advertisings effect on demand?

Advertising has a very powerful influence on consumer demand as it seeks to influence consumer choice.

What is the effect of a change in the size and age distribution of the population?

• An increase in population is likely to increase demand for goods

• A fall in population is likely to lead to a decrease in the demand for goods

• Changes in population (or ‘demographic’) structure is also likely to influence demand patterns

For example, an ageing population would lead to an increase in demand for products aimed at older people (e.g. winter cruises and stair-lifts) but a decrease in the demand for products aimed at the young (e.g. energy drinks).

What is social trends affect on demand?

The rising of single households could increase the demand for goods and services such as houses, furniture or dating sites.

Additionally, if consumers are concerned about issues like health, the environment or animal welfare eco friendly products will be in demand.

What is the effect of demand from expectation of future prices?

If consumers expect the price of a good to rise in the future, current demand is likely to increase. e.g stocks, housing

If consumers expect the price of a good to fall in the future, current demand is likely to decrease.

What is derived demand?

Many goods are demanded because they are needed in the production of other goods.

The demand for a good is derived from the demand for the good it produces,

For example, an increase in the demand for cars will results in an increase in demand for steel used in the production of cars and workers in the industry.

What will the demand curve for the demand for oranges following a decrease in the price of oranges look like?

It is the affect of only oranges so will move down the demand curve.

What does the law of demand state?

there is an inverse relationship between quantity demanded and the price of a good or service, ceteris paribus

If the average price of a car were to fall from £15,000 to £10,000, then quantity demanded of cars would rise and vice versa.

What does the demand curve visually do?

downward slopes from left to right, showing that as price falls, quantity demanded rises and vice versa.

What does the demand curve show?

• the quantity demanded at any given price

• The demand curve also shows effective demand, i.e. how much consumers are willing and able to buy, not how much they would like to buy if they had unlimited resources

What also influences the shape of the demand curve?

The concept of diminishing marginal utility.

What does the demand curve show?

effective demand

How does the demand curve illustrate the law of diminishing marginal utility?

The value or utility, attached to consuming the last product bought as more units are consumed over a given period of time

e.g a student may pay to watch a movie for £5 on a Saturday and may be prepared to watch a second movie but values the second film less- would feel negative marginal utility and would not buy another movie

Why do consumers buy diamonds when they are not a necessity?

Consumers are prepared to pay diamonds for such a high price while the price of necessities like water is low- this problem is known as the paradox or value.

The law of diminishing marginal utility can explain this paradox- if there are few goods available then consumers are prepared to pay a high price for them because pf the high marginal utility (explaining the demand curve sloping downward)