Demand (chpt 4)

Effective Demand

demand for goods/services backed up by the necessary purchasing power

Derived Demand

demand for a good which only occurs because it is useful in the manufacture of another good

Composite Demand

When a good has a number of different uses

Joint Demand

When demand for one good is linked with demand for another

Substitute Good

Goods that satisfy same need and can be replaced by each other

Normal Goods

Goods with a positive income effect

Inferior Goods

Goods with a negative income effect, eg. shopping at Aldi/Lidl

Giffen Goods

Necessity goods of low income families which has a positive price effect (doesn't follow the law of demand), eg. milk, bread

Law of Demand

As the price of goods increase, the quantity demanded decreases and vice versa

Factors Affecting Demand

Price of good x (Px), Price of other goods (Pog), Income (Y), Expectations (Ex), Tastes (T), Unplanned factors (U), Government Regulations (G)

Snop/Veblen/Exclusive Goods

Goods which attract customers because of their exclusiveness or high price

Goods Influenced by Expectation

Goods that people try to predict the price of in the future

Addictive Goods

Goods that addicts, who are irrationally thinking, will buy no matter the price

Exceptions to the Law of Demand

Giffen Goods, Veblen Goods, Goods Influenced by Expectation, Addictive Goods

This is due to that quantity demanded for these goods can increase as price increases and vice versa

Individual demand

The quantity demanded of a good or service by individual consumers at different prices

Market demand

Aggregate (total) quantity of a good or service that would be demanded by all consumers in a market at different prices

Joint demand

Complementary goods that are bought and sold together, eg. fish and chips

Demand schedule

Table that gives quantities of a good/service that would be demanded by consumers at different prices

Shifts of vs movement along

Movement along demand curve: only occurs when price of the good changes (curve does not move) (Px)

Shift of demand curve: movement of curve due to a change in price of other goods (Pog), income (Y), expectations of future prices (Ex), tastes, trends, and fashions (T), unplanned factors (U), and government policy and regulations (G)

Px : Pog, Y, Ex, T, U, G