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LC Econ Demand

LC Economics Demand

QuestionAnswer
Demand function A list of all the factors affecting the demand of a good.
Complentary goods Goods that are in joint demand. The use of one involves the use of the other,.
Giffen good A good for which quantity demanded increases if price rises and quantity demanded falls if price falls.
Income effect The observation that if the price of a good falls the real income of the consumer is increased,allowing more of any good to be purchased.
Individual demand curve A graph showing the different quantities of a good ( or service) an individual consumer is prepared to buy at each price.
Individual demand schedule A list or table showing the different quantities of a good of a good ( or service) an individual consumer is prepared to buy at each price.
Inferior good A good with a negative income effect. A rise in income causes less of it to be demanded while a fall in income causes more of it to be demanded.
Law of demand The relationship between price and quantity demanded that applies to the vast majority of goods , that is , if price rises quantity demanded falls and if price falls quantity demanded rises.
Market demand curve A graph showing the different quantities of a good ( or service ) that all consumers in the market are prepared to buy at each price.
Market demand schedule A list ( or table ) showing the different quantities of a good ( or service) that all consumers in the market are prepared to buy at each price.
Money Income A persons earnings expressed in money terms over a period of time.
Normal good A good with a positive income effect. A rise in income causes more of it to be demanded while a fall in income cause less of it to be demanded.
Real Income The purchasing power of a persons money income over a period of time ( that is , how much he/she can buy with his/her money income).
Snob good ( or status symbol) A good that is attractive to some consumers because it is expensive. A rise in price will cause an increase in demand and a fall in price will cause a fall in demand.
Substitution effect The observation that if the price of a good falls the consumer is likely to buy more of it because it is cheaper relative to other goods.
Substitution goods Goods that satisfy the same need and so can be used instead of each other.
List the factors that affect the demand of a good 1. Depends on its own price. 2. Depends on the price of other goods. 3. Depends on the level of income. 4. Depends on taste. 5. Depends on the expectations of consumers concerning future prices , availability or incomes.
List three exceptions to the law of demand. 1. Giffen goods 2. Snob goods 3. Goods affected by consumers expectations.
Distinguish between substitution effect and income effect. The substitution effect is the observation if the price of a good falls the good because cheaper relative to other goods and the income effect is the observation that if the price of a good falls the real income of the consumer is increased.
Ceteris paribus All other things being equal
Factors influencing Demand Price, Income, Price of Substitutes and Complements,Consumer Taste, Expectation about the Future, Government Regulations
Movement along a Demand Curve Caused by the change in the price of a goods. Remember that a demand curve is a function which shows the quantity demanded at different prices. And the quantity demanded is the quantity that buyers are willing and able to purchase at a particular price.
Shift in a Demand Curve Caused by the change in any factor other than price of the good. You know that an increase in demand means a shifting out of the demand curve. An increase in demand means there's a greater quantity demanded at every price.
Individual demand The quantity of a good an individual consumer demands at different prices.
Market demand The total quantity of a good that all consumers demand at different prices.
Effective demand Demand supported by the necessary purchasing power. Where one wishes to have a good but also has the means to buy the good.
Latent demand This exists when there is willingness to buy among people for a good or service, but where consumers lack the purchasing power to be able to afford the product.
Derived demand Where a factor or production (land, labour, capital and enterprise) is demanded not for its own use but for its contribution to the production process.
Created by: MrFromholz
 

 



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