Economics- Edexcel 1.2.2
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| demand | the quantity of a product that consumers are willing and able to buy at a given price in each time
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| effective demand | when a desire to buy a product is backed up by having an ability to pay
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| derived demand | the demand for a factor of production used to produce another good or service
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| derived demand- steel | the demand for steel is linked to market demand for cars and construction of new buildings
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| derived demand- cloud computing infrastructure | growth in the cloud infrastructure service space is driven by increasing demand for information and data storage , e.g. the surge in demand for online video streaming and online gaming
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| derived demand- transport | a fall in demand for commuting during the pandemic led to a steep decline in the demand for public transport
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| derived demand- cobalt | 50% of all cobalt demand is for battery use such as for smartphones and electric vehicles
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| derived demand- logistics | falls in demand for new cars means a reduced demand for logistics services provided by companies such as DHL
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| logistics | the process of coordinating and moving resources from one location to storage at the desired destination
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| cloud computing | the practice of using a network of remote servers hosted on the internet to store, manage, and process data, rather than a local server or a personal computer
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| infrastructure | the basic physical systems of a business, region, or nation and often involves the production of public goods or production processes
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| normal good | a good that experiences an increase in it’s demand due to a rise in consumers' income
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| the basic law of demand | there is normally an inverse relationship between the price of a good and demand(as prices fall we see an expansion/extension of demand or as price rises there will be a contraction of demand)
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| ceteris paribus when drawing a demand curve | all factors are held constant except one- the price of the product itself
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| demand curve | shows the relationship between the price of an item and quantity demanded over a period of time
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| reason 1 why more is demanded as price falls | the income effect
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| the income effect | when the price of a good falls the consumer can maintain the same consumption for less spending, if it is a normal good then some of the increase in real income is used to buy more
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| reason 2 why more is demanded as price falls | the substitution effect
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| the substitution effect | when the price of a good falls, ceteris paribus, the product is now relatively cheaper than an alternative and some consumers will switch their spending form an alternative good or service
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| impact of the substitution effect | the more substitutes there are in a market + the lower the cost and inconvenience of switching = the bigger the substitution effect is likely to be
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| diminishing marginal utility and the demand curve | when more of a good is consumed additional utility from each extra unit consumed will fall- because consumers are assumed to be rational they won’t pay more for a good than the additional utility it provides, so price and quantity are inversely related
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| the demand curve and price falling | a person switches away from rival products towards the product, a persons willingness and ability to buy the product increases, a person’s opportunity cost of purchasing the product falls
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| inferior goods | a good whose demand drops when people's incomes rise
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| competitive demand | occurs when there are alternative services or products a customer can choose from
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| joint demand | when you need two goods because they work together to provide a benefit for the consumer, so two complementary goods and services are said to be in joint demand
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| peer pressure | influence from members of one's peer group
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| herd behaviour | a phenomenon in which individuals act collectively as part of a group, often making decisions as a group that they would not make as an individual
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| cost of credit | to the expenses charged to the borrower in a credit agreement
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| credit | a contractual agreement in which a borrower receives something of value immediately and agrees to pay for it later, usually with interest
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| a change in price causes: | a movement along the demand curve
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| increase in any other factor than price: | shift in the demand curve
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| cross-price elasticity of demand | the percentage change in the quantity demanded of a given product due to the percentage change in the price of another "related" product
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| elasticity of demand | how demand responds to a change in price or income
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| cross-price elasticity of demand for two complements | negative
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| composite demand | where a product has more than one demand, so an increase in demand for one product leads to a fall in supply of the other, e.g. milk used for cheese, yoghurt, butter and fertilisers
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| utility | measures the satisfaction we get from purchasing and consuming a product
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| total utility | the total satisfaction from a given level of consumption
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| marginal utility | the change in satisfaction from a given level of consumption
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| diminishing marginal utility | theory believes in the assumption of diminishing returns
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| assumption of diminishing returns | the marginal utility of extra units decline as more is consumed
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| rational choice theory | assumes that consumers always behave rationally in allocating their limited budget between different products to maximise total satisfaction from their purchases
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| behavioural economists | challenge the assumption of pure rationality in people’s everyday decisions
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| complement | goods and services that are used and bought together
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| composite demand | demand for a product that has more than one use
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| excess demand | the difference between the quantity supplied and the higher quantity demanded when price is set below the equilibrium price, resulting in queuing and an upward pressure on price
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| law of demand | inverse relationship between price and demand
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| off-peak demand | periods of time when demand for consumers is below normal levels, so firms often lower the price to stimulate demand
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| rational choice | involves the weighing up of costs and benefits and trying to maximise the surplus of benefits over costs
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| real disposable income | income adjusted fro inflation after direct taxes
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| seasonal demand | demand that varies according to the time of year
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| speculative demand | demand for financial assets where investors expect the price to rise in the future
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| Veblen good | as price increases people buy more of these goods to demonstrate their social status
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| willingness to pay | the maximum price a consumer is prepared to pay to obtain a product
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| effective demand | the level of demand that represents a real intention to purchase by people with the means to pay
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| notional demand | the aggregate quantity of goods which would be demanded if all the markets were in equilibrium
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| potential demand | where the consumer possesses the necessary purchasing power, but is not currently buying the product under consideration
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| law of demand | there is an inverse relationship between price and demand
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| ceteris paribus | ’all things being equal’
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| complements | products which are bought and used together
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| the paradox of value | examines why goods that are not essential to life can command a much higher price than goods that are essential to life, e.g. water and diamonds
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| seasonality | fluctuations in output and sales related to the season of the year
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| factor market | a market where factors of production are bought and sold
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| composite demand | goods have more than one use
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