Questions and Answers
What does 'ceteris paribus' mean?
What happens during a change in demand?
When things other than prices shift the supply curve.
What is a normal good?
What happens to the demand for inferior goods when income increases?
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Which of the following can cause a change in demand due to consumer expectations?
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How does population affect demand?
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What are complements?
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What differentiates a shift along the demand curve from a shift of the demand curve?
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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.
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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!