Edexcel A-level Economics Theme 1.2

Demand

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

Factors that lead to a shift in demand

• P - Population

• A - Advertising

• S - Substitues

• I - Income

• F - Fashion and Trends

• I - Interest rates

• C - Complements

What happens to quantity and price when there is a contraction of demand?

Quantity demanded decreases, price increases

What happens to quantity and price when there is a expansion of demand?

Quantity demanded increases, price decreases

Change in price of the good itself = ____ along demand curve

Movement along demand curve

Change in PASIFIC factors = ____ of demand curve

Shift of the demand curve

Composite demand

Demand for a good that has more than one purpose - e.g. milk.

Derived demand

Demand for a good whose demand depends on the demand of another good.

Complementary / Joint demand

When two goods are demanded together - demand for one depends on demand for the other.

Complementary good

A good which is consumed jointly with another - increase in price of one will likely lead to the fall in demand for the other.

Substitute good

A good which can be used in place of another - an increase in price of one will likely lead to the rise in demand for its substitute.

Rational Behaviour

Utility

Marginal Utility

The additional (extra) satisfaction or benefit a consumer gets for every one additional unit of goods or services

The Law of Diminishing Marginal Utility

The law of diminishing marginal utility states that as a person consumes more units of a particular good or service while keeping the consumption of other goods constant, the additional satisfaction or marginal utility gained from each additional unit will decrease.

Profit

The total revenue a firm receives from selling its product minus the total cost of production.

PED

P