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Flashcards in Demand Deck (22)
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1

price of complement decreases

increase in demand

2

price of substitute increases

increase in demand

3

income increases (normal good)

increase in demand

4

income decreases (inferior good)

increase in demand

5

personal wealth decreases

decrease in demand

6

population increases

increase in demand

7

expectation that price will fall in future

decrease in demand

8

successful advertising campaign

increase in demand

9

what is the theory of demand?

at a higher price a lower quantity will be demanded, ceteris paribus and vice versa

10

effective demand

willing AND able

11

why is a demand curve downwards sloping?

income and substitution effects

12

substitution effect

as price rises (or income decreases) consumers replace more expensive goods with cheaper alternatives - decrease in quantity demanded

13

income effect

as income increases, quanity demanded of good increases as consumers are wealthier, good is relatively cheaper

14

demand equation

Qd = mP + A

15

equation for gradient in demand graph

change in Qd / change in P
change in x / change in y

16

what is A on demand equation?

x-intercept

17

movement along demand curve

when go from one combination on the demand curve to another
change that depends on price

18

shift in demand

when anything other than price changes

19

exceptions to theory of demand

vertical demand curve
Veblen goods
Giffin goods

20

vertical demand curve

will buy same quantity at any price, e.g. life-saving medication

21

Veblen good

upwards sloping demand curve
very wealthy pay more to show status

22

Giffin good

extreme subset of inferior goods
e.g. under extreme poverty, when price of bread rises forced to lose other food sources because bread relatively cheapest and invest everything in bread purchasing