Economics 2.2
Demand
What is demand?
The quantity of a good or service that consumers are willing and able to buy at a given price in a given time period
What is derived demand?
Demand that comes about because of demand for another product
What is the law of demand?
For most goods and services the quantity demanded varies inversely with price
What is individual demand?
The demand for goods and services by an individual consumer. This shows the amount they would be prepared to buy at different prices. It does not tell us how many they will buy
What is a market demand?
The total demand for a good or service and can be found by adding the individual demands together
What is a normal good?
A good where demand increases as income increases
What is the relationship between price and demand?
As price increase, demand falls. As price falls, demand increases
How do you draw demand?
The demand curve is plotted sloping downwards between price on the vertical axis and quantity demanded on the horizontal axis. 
Key Vocab
Substitute - a good or service that can be used in place of another
Compliment - a good or service that can be used in place of another
Subsidy - An amount of money the government directly gives to firms to encourage production and consumption
Derive - To obtain something from
Elastic - When the percentage change in quantity demanded is greater than the percentage change in price
Elasticity - the degree to which a demand or supply is sensitive to changes in price or income
Inelastic - when the percentage change in quantity demanded is less than the percentage change in price
Inverse - something that is the opposite or reverse of something else
What is the difference between a movement along and a shift in demand?
What is the cause of a movement along the curve?
A change in price is the only thing that is able to change the movement along the demand curve
How do you draw a movement?
What are the consequences of movements along the demand curve?
A movement along the demand curve will lead you to price and quantity moving in the complete opposite direction
If there is an increase in quantity demanded due to a fall in price causing a movement in the curve then due to the price falling, the quantity increases
A decrease in quantity demanded due to an increase in price causes a movement up the curve and therefore the price increases but the quantity falls
What is the difference between a movement and a shift in the demand curve?
What causes a shift in demand?
This is when the whole demand curve moves to the left or the right. This occurs when the quantity of a good demanded changed even when price stays the same
Factors affecting demand are income, population, marketing, tastes/fashion, substitutes/compliments, government policies and price expectations for the future
How do you draw a shift in demand?
What are the consequences of a shift in demand?
In nearly all cases a shift of the demand curve will lead to price and quantity moving in the same direction
Why is price elasticity of demand important?
What is elasticity of demand?
A measure of the responsiveness of quantity demanded to a change in the price of the product
How do you calculate PED?
% change in quantity demanded / (divided by) % change in price
What does inelastic demand mean?
The price change will lead to a smaller change in demand. The PED value will be between 0 and -1
What does elastic demand mean?
The price change will lead to a larger change in demand. The PED value will be between -1 and infinity
What does unitary demand mean?
The price change will lead to the exact change in demand. The PED value is 1
What do the PED values mean?
How does PED affect consumers?
Governments could impose taxes on goods with inelastic demand. Some customers with forced inelastic demand have to pay higher prices.
How does PED affect producers?
Knowledge of PED can be used to impact revenue by changing price strategies
What do the PED curves look like?