A Level Economics Flashcards

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What is a market? Anywhere buyers and sellers can exchange goods or services.
How is the price charged for a good (or service) determined? By the levels of
demand and supply in a market. 
What is ‘Demand’? The quantity of a good/service that consumers are willing and
able to buy at a given price, at a particular time. 
What does a demand curve show? The relationship between price and quantity
demanded.
What is a ‘contraction’ in demand on a diagram? Where the quantity demanded
decreases and the price increases. 
What is an ‘extension’ in demand on a diagram? When the quantity demanded
increases and the price decreases. 
Which direction do demand curves usually slope? Downwards
If there is a decrease in the quantity demanded at each price, what happens to the
demand curve? It shifts to the left. 
What happens if there is an increase in the quantity demanded at every price. 
The demand curve shifts to the right.
How can changes in tastes and fashion cause demand curves to shift? If a good
becomes more popular, the demand curve will shift to the right. If a good becomes
less popular, the demand curve will shift to the left. 
How are ‘normal goods’ affected by a change in people’s real income? The demand
for the good will increase with an increase in real income. 
What will happen to the demand of ‘inferior goods’ if there is a rise in people’s
real income? There will be a decrease in demand. This causes the demand curve
to shift to the left. People demand less at each price level since they’ll often
switch to more expensive goods instead.
How may ‘luxury goods’ be affected by a more equal distribution of income? The
demand curve for ‘luxury goods’ will shift to the left. This is because they’ll be
fewer really rich people who can afford luxury items, and more people can afford
everyday items. 
What do markets being ‘interrelated’ mean? Changes in one market affect a
related market. 
What are ‘substitute goods’? Goods which are alternatives to each other.
How will an increase in the price of a good affect its substitutes? It will
decrease the demand for the product with a price change and increase the demand for
its substitutes.
What is the interaction between substitute goods also known as? Competitive Demand
What are ‘complementary goods’? Goods that are often used together.
What is the interaction between complementary goods also known as? Joint Demand
What happens to the demand of a good’s complements if there is a price increase?
If the price of one good increases, the demand for them will decrease
alongside the complements of the good. Eg. Petrol and Cars
What factors may cause a shift in the demand curve? Substitute goods having a
price change<div>Complementary goods having a price change</div><div>The
introduction of a new product - if the good is a substitute or complement to
it</div><div>Derived Demand changing</div><div>Composite Demand changing</div>
How may the introduction of a new product cause a shift in the demand curve? The
introduction of a new product may cause the demand curve to shift to the left for
goods that are substitutes for the new product and to the right for goods that are
complementary to it.
What is ‘Derived Demand’? The demand for a good or factor of production used in
making another good or service.
How may changes in ‘Derived Demand’ cause a shift in the demand curve? An increase
in the demand for one good will lead to an increase in derived demand for another
good. For example, an increase in the demand for cheese will cause an increase in
the derived demand for milk.&nbsp;
What is ‘Composite Demand’? The demand for a product that has more than one use.
For example, Oil can be used to make plastics or for fuel.