Demand Flashcards

1
Q

price of complement decreases

A

increase in demand

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2
Q

price of substitute increases

A

increase in demand

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3
Q

income increases (normal good)

A

increase in demand

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4
Q

income decreases (inferior good)

A

increase in demand

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5
Q

personal wealth decreases

A

decrease in demand

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6
Q

population increases

A

increase in demand

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7
Q

expectation that price will fall in future

A

decrease in demand

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8
Q

successful advertising campaign

A

increase in demand

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9
Q

what is the theory of demand?

A

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

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10
Q

effective demand

A

willing AND able

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11
Q

why is a demand curve downwards sloping?

A

income and substitution effects

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12
Q

substitution effect

A

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

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13
Q

income effect

A

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

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14
Q

demand equation

A

Qd = mP + A

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15
Q

equation for gradient in demand graph

A

change in Qd / change in P

change in x / change in y

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16
Q

what is A on demand equation?

A

x-intercept

17
Q

movement along demand curve

A

when go from one combination on the demand curve to another

change that depends on price

18
Q

shift in demand

A

when anything other than price changes

19
Q

exceptions to theory of demand

A

vertical demand curve
Veblen goods
Giffin goods

20
Q

vertical demand curve

A

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

21
Q

Veblen good

A

upwards sloping demand curve

very wealthy pay more to show status

22
Q

Giffin good

A

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