Demand: 60 flashcards
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1. Define demand.
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Demand is the quantity of a good or service that consumers are willing and able to buy at a given price during a given period of time.
2. What is the law of demand?
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The law of demand states that, all else equal, as the price of a good rises, the quantity demanded falls, and as the price falls, the quantity demanded rises.
3. What is the difference between demand and quantity demanded?
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Demand refers to the entire demand curve (the whole relationship between price and quantity demanded). Quantity demanded refers to a specific amount demanded at a particular price.
4. What is a demand schedule?
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A demand schedule is a table that shows the quantity demanded of a good at different prices, holding other factors constant.
5. What is a demand curve?
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A demand curve is a graph that shows the relationship between the price of a good and the quantity demanded, typically downward sloping.
6. Why does the demand curve slope downward?
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It slopes downward due to the income effect (as price falls, real income rises, so more is bought) and the substitution effect (as price falls, the good becomes cheaper relative to substitutes, so more is bought).
7. What is a change in quantity demanded?
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A change in quantity demanded is a movement along the demand curve caused only by a change in the price of the good itself.
8. What is a change in demand?
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A change in demand is a shift of the entire demand curve caused by a change in a factor other than the price of the good (e.g., income, tastes, prices of related goods).
9. What are normal goods?
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Normal goods are goods for which demand increases when consumer income rises, and decreases when income falls.
10. What are inferior goods?
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Inferior goods are goods for which demand decreases when consumer income rises, and increases when income falls.
11. What are substitutes?
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Substitutes are goods that can be used in place of each other. An increase in the price of one good leads to an increase in demand for the other.
12. What are complements?
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Complements are goods that are used together. An increase in the price of one good leads to a decrease in demand for the other.
13. How does a change in consumer income affect demand for a normal good?
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For a normal good, an increase in income shifts the demand curve to the right (demand increases); a decrease in income shifts it to the left (demand decreases).
14. How does a change in consumer income affect demand for an inferior good?
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For an inferior good, an increase in income shifts the demand curve to the left (demand decreases); a decrease in income shifts it to the right (demand increases).
15. How does a change in the price of a substitute affect demand?
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If the price of a substitute rises, demand for the original good increases (shifts right). If the price of a substitute falls, demand for the original good decreases (shifts left).
16. How does a change in the price of a complement affect demand?
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If the price of a complement rises, demand for the original good decreases (shifts left). If the price of a complement falls, demand for the original good increases (shifts right).
17. How do changes in tastes and preferences affect demand?
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A favorable change in tastes increases demand (shifts right); an unfavorable change decreases demand (shifts left).
18. How does population affect demand?
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An increase in population typically increases demand for most goods (shifts right); a decrease in population typically decreases demand (shifts left).
19. What is the effect of expectations of future prices on current demand?
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If consumers expect prices to rise in the future, current demand increases (shifts right). If they expect prices to fall, current demand decreases (shifts left).
20. What is the difference between a movement along the demand curve and a shift of the demand curve?
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A movement along the demand curve is caused by a change in the price of the good itself (change in quantity demanded). A shift of the demand curve is caused by a change in any other determinant of demand (change in demand).
21. What is market demand?
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Market demand is the sum of all individual quantities demanded by all consumers at each price.
22. What is the law of demand's ceteris paribus assumption?
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The law of demand holds other factors constant (ceteris paribus), meaning only the price of the good changes while income, tastes, prices of related goods, etc., remain unchanged.
23. What is a Giffen good?
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A Giffen good is a special type of inferior good for which an increase in price leads to an increase in quantity demanded, violating the law of demand.
24. What is conspicuous consumption?
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Conspicuous consumption is the purchase of goods to display wealth and status, which can lead to a positive relationship between price and quantity demanded for some luxury goods (Veblen goods).
25. What is the difference between individual demand and market demand?
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Individual demand is the demand of a single consumer; market demand is the total demand of all consumers in the market.
26. What happens to the demand curve when demand increases?
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The demand curve shifts to the right (outward).
27. What happens to the demand curve when demand decreases?
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The demand curve shifts to the left (inward).
28. List the determinants of demand (factors that shift the demand curve).
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1. Consumer income 2. Prices of related goods (substitutes and complements) 3. Tastes and preferences 4. Population and demographics 5. Expectations of future prices, income, etc. 6. Government policies (taxes, subsidies)
29. What is the relationship between price and quantity demanded as shown by the law of demand?
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They are inversely related: when price goes up, quantity demanded goes down; when price goes down, quantity demanded goes up.
30. What is the difference between a normal good and an inferior good?
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For normal goods, demand increases when income rises. For inferior goods, demand decreases when income rises.
31. How does a change in the price of a good affect quantity demanded?
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A change in the price of the good itself causes a movement along the demand curve, changing quantity demanded.
32. What is the effect of an increase in the price of a complement on the demand for a good?
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Demand for the good decreases (shifts left) because the two goods are used together.
33. What is the effect of an increase in the price of a substitute on the demand for a good?
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Demand for the good increases (shifts right) because consumers switch to the relatively cheaper good.
34. What is the effect of a decrease in consumer income on the demand for an inferior good?
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Demand for the inferior good increases (shifts right) because consumers buy more of it as they can afford less of normal goods.
35. What is the effect of a decrease in consumer income on the demand for a normal good?
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Demand for the normal good decreases (shifts left) because consumers can afford less.
36. What is the effect of a favorable change in tastes on demand?
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Demand increases (shifts right).
37. What is the effect of an unfavorable change in tastes on demand?
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Demand decreases (shifts left).
38. What is the effect of an increase in population on demand?
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Demand increases (shifts right) because there are more consumers.
39. What is the effect of an expectation of higher future prices on current demand?
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Current demand increases (shifts right) as consumers buy now to avoid higher prices later.
40. What is the effect of an expectation of lower future prices on current demand?
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Current demand decreases (shifts left) as consumers wait for lower prices.
41. What is the difference between a change in demand and a change in quantity demanded?
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A change in demand is a shift of the entire demand curve due to a non-price determinant. A change in quantity demanded is a movement along the demand curve due to a change in the good's own price.
42. What is the law of demand?
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The law of demand states that, all else equal, as the price of a good rises, the quantity demanded falls, and as the price falls, the quantity demanded rises.
43. What is a demand schedule?
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A demand schedule is a table that shows the quantity demanded of a good at different prices, holding other factors constant.
44. What is a demand curve?
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A demand curve is a graph that shows the relationship between the price of a good and the quantity demanded, typically downward sloping.
45. What is market demand?
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Market demand is the sum of all individual quantities demanded by all consumers at each price.
46. What are the determinants of demand?
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Income, prices of related goods, tastes, population, expectations, and government policies.
47. What is a normal good?
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A normal good is a good for which demand increases when income rises.
48. What is an inferior good?
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An inferior good is a good for which demand decreases when income rises.
49. What are substitutes?
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Substitutes are goods that can be used in place of each other; an increase in the price of one increases demand for the other.
50. What are complements?
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Complements are goods used together; an increase in the price of one decreases demand for the other.
51. What is the effect of an increase in income on demand for a normal good?
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Demand increases (shifts right).
52. What is the effect of an increase in income on demand for an inferior good?
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Demand decreases (shifts left).
53. What is the effect of an increase in the price of a substitute on demand?
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Demand for the original good increases (shifts right).
54. What is the effect of an increase in the price of a complement on demand?
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Demand for the original good decreases (shifts left).
55. What is the effect of a change in tastes on demand?
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Favorable tastes increase demand (shift right); unfavorable tastes decrease demand (shift left).
56. What is the effect of population on demand?
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An increase in population increases demand (shifts right); a decrease decreases demand (shifts left).
57. What is the effect of expectations of future prices on current demand?
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Expectation of higher future prices increases current demand (shifts right); expectation of lower future prices decreases current demand (shifts left).
58. What is the difference between a movement along the demand curve and a shift of the demand curve?
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A movement along the demand curve is caused by a change in the price of the good itself. A shift of the demand curve is caused by a change in a non-price determinant of demand.
59. What is a Giffen good?
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A Giffen good is an inferior good for which an increase in price leads to an increase in quantity demanded, violating the law of demand.
60. What is conspicuous consumption?
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Conspicuous consumption is the purchase of goods to display wealth and status, which can lead to a positive relationship between price and quantity demanded for some luxury goods (Veblen goods).
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