Economics Chapter 4 Section 2

Study Notes

Ceteris Paribus

Definition: Latin term meaning "all things held constant."
Relevant in scenarios where price changes affect the number of products sold, under the assumption of ceteris paribus.

Change in Demand

Refers to shifts in the demand curve due to factors other than price.
Example: A heat wave increases demand for Kool-Aid, shifting the demand curve to the right.

Normal Goods

Items that consumers demand more of when their incomes increase.
Demand for normal goods shifts to the right with rising incomes and to the left with decreasing incomes.

Causes of Change in Demand: Income

Most purchases by consumers are categorized as normal goods.
When income rises, the demand for normal goods increases, shifting the demand curve to the right; the opposite occurs when incomes fall.

Inferior Goods

Goods for which demand decreases as consumer income rises.
Example: If a consumer's income increases, they will buy fewer inferior goods, shifting the demand curve to the left.

Causes of Change in Demand: Consumer Expectations

Future price expectations impact current demand.
Anticipation of a price hike leads to increased demand now; expectation of a sale results in decreased demand.

Causes of Change in Demand: Population

An increase in population can lead to higher demand for certain products.
Example: A baby boom results in increased demand for diapers.

Causes of Change in Demand: Consumer Tastes and Advertising

Advertisements and social trends can significantly influence demand.
Effective advertising campaigns are designed to enhance consumer interest and demand.

Complements

Goods that are often purchased together.
An increase in the demand for one complement typically results in increased demand for the other.

Substitutes

Goods that can replace one another.
A rise in the price of one substitute tends to increase demand for its alternative.

Difference in Demand Curve Shifts

Shift along the demand curve is influenced by price changes while holding other factors constant.
Shifts of the demand curve occur due to changes in income, population, consumer tastes, expectations, etc., not dependent on price.

Description

Explore the shifts of the demand curve with key concepts through engaging flashcards. This quiz covers important terms such as 'ceteris paribus' and 'normal good', providing a concise understanding of how demand changes with various factors. Test your knowledge and deepen your grasp of demand curve dynamics!