what factors affect demand?

Factors
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Terms in this set (19)
Factors
income effect, substitution effect, change in demand, normal goods, inferior goods, substitutes.
income effect
A change in the quantity demanded of a product that results from the change in real income (purchasing power) caused by a change in the product's price.
substitution effect
Consumers ability to substitute other products for the focal brand and increase price elasticity of demand for the focal brand
change in demand
A change in the quantity demanded of a good or service at every price; a shift of the demand curve to the left or right.
normal good
A good for which, other things equal, an increase in income leads to an increase in demand
inferior good
A good for which the demand increases as income falls and decreases as income rises.
substitute
Competing products that can be used in place of one another; products related in such a way that an increase in the price of one increases the demand of the other.
positive effect of income effect
Higher the income, the more of a product people will buy
positive effect of substitution effect
helps people spend less for the same product
positive effect of change in demand
Shows the elasticity of a product if they can keep up with the demand
positive effect of normal goodIt is the product most people buy when they have normal incomepositive effect of inferior goodIt is the product people go to with low incomepositive effect of substituteIt gives people more choice in the product they are looking for\negative effect of income effectWith lower income, demand will dropnegative effect of substitution effectwhen demand drops on a substitute another will rise in demandnegative effect of change in demandIf a producer cant keep up with change in demand they will lose profitsnegative effect of normal goodif inferior goods rise then the normal goods will fall in demandnegative effect of inferior goodIf income never drops then inferior goods will stay in the minoritynegative effect of substituteIf the demand never drops for a item then the substitutes will never be picked up