Factors of Demand Flashcards

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Questions and Answers

What are the six Factors of Demand?

Substitutes (correct)

Market Size (correct)

Complements (correct)

Consumer Taste (correct)

Consumer Expectations (correct)

Income (correct)

What is Factor 1: Income?

A person's ability to buy goods changes as his/her income changes.

What is Factor 2: Market Size?

As the number of consumers in an area changes, so does the market size.

What is Factor 3: Consumer Taste?

Consumers' tastes change, products gain and lose popularity. Signup and view all the answers

What is Factor 4: Consumer Expectations?

Expectations about future price of items affect individual behavior. Signup and view all the answers

What is Factor 5: Substitutes?

Products used in place of each other. Signup and view all the answers

What is Factor 6: Complements?

Goods that are used together. Signup and view all the answers

What is a negative effect on Income?

When consumers don't have as much money to spend, they depend less on normal goods and settle for inferior goods. Signup and view all the answers

What is the negative effect of Market Size?

The demand for goods changes as the market size changes. Signup and view all the answers

What is the negative effect of Consumer Taste?

If the consumer changes their taste, then the demand for a certain product will decrease. Signup and view all the answers

What is the negative effect on Consumer Expectations?

The expectations of a consumer will determine whether the product fails or prospers. Signup and view all the answers

What are the negative effects of Substitutes?

If the price of a substitute product is lower than any other, the consumers will buy the substitute product. Signup and view all the answers

What are the negative effects of Complements?

When the price of a product rises, then the demand for the complement product will be in demand. Signup and view all the answers

What is a positive effect on Income?

When consumers have more money to spend, their demand for certain products will rise as well. Signup and view all the answers

What is a positive effect on Market Size?

The demand will rise if there are more people in a certain area. Signup and view all the answers

What is a positive effect on Consumer Taste?

The demand for a product will rise if the consumer has desires for it. Signup and view all the answers

What is a positive effect on Consumer Expectations?

If a consumer expects a good product, they will be willing to go and purchase it. Signup and view all the answers

What is a positive effect on Substitutes?

If the price of the original product rises, then the consumers will buy the substitute product. Signup and view all the answers

What is a positive effect on Complements?

A rise in demand of one product will increase the demand of its complement. Signup and view all the answers

Study Notes

Six Factors of Demand

The six key factors influencing demand are: Income, Market Size, Consumer Taste, Consumer Expectations, Substitutes, and Complements.

Factor 1: Income

An individual's purchasing power is directly linked to their income.
Changes in income can lead to shifts towards normal goods or inferior goods.

Factor 2: Market Size

Demand increases or decreases as the number of consumers in a market expands or contracts.
A larger market size typically leads to increased overall demand.

Factor 3: Consumer Taste

Trends and preferences affect product popularity over time.
A shift in consumer tastes can cause a drop in demand for certain items.

Factor 4: Consumer Expectations

Anticipations about future prices and availability impact consumers’ current purchasing decisions.
Positive expectations can encourage spending, while negative ones can hinder it.

Factor 5: Substitutes

Substitutes are products that can replace one another.
A decrease in the price of substitutes can lead to a decline in demand for the original product.

Factor 6: Complements

Complementary goods are items that are often used together.
An increase in the price of one product can reduce demand for its complement.

Negative Effects on Demand

A decrease in income leads to reliance on inferior goods, decreasing demand for normal goods.
Shrinking market size results in varying demand based on fewer consumers.
Changes in consumer taste can negatively impact the demand for specific products.
Negative consumer expectations can result in product underperformance and reduced demand.
Lower priced substitutes draw consumers away from more expensive options.
Rising prices of one product can diminish demand for its complementary goods.

Positive Effects on Demand

Increased consumer income typically enhances demand for various products.
An expanding market size results in higher demand due to more potential buyers.
Positive consumer desire boosts demand for products that align with their preferences.
Favorable expectations encourage consumers to purchase products perceived as high quality.
Rising prices of original products can lead to increased demand for substitutes.
An increase in the demand for one good generally leads to an increase in demand for its complements.

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Description

This quiz focuses on the six key factors that influence demand in economics. From income to consumer expectations, each factor plays a crucial role in understanding market dynamics. Use these flashcards to test your knowledge and enhance your grasp of demand-related concepts.