Final answer:
Jasper's demand for steak is influenced by the 'income effect,' which occurs when changes in income affect purchasing power and consequently the demand for normal goods like steak increases as income rises, while the demand for inferior goods like chicken decreases.
Step-by-step explanation:
After getting a raise at work, Jasper now regularly buys steak instead of chicken. This change in Jasper's buying habits is influenced by a factor of demand known as income effect. In economics, when a person's income increases, their purchasing power improves, and they can afford to buy more expensive or higher-quality items, known as normal goods. This increase in demand for a particular good due to an increase in income illustrates the tendency for consumers to prefer higher-quality goods as their disposable income rises. Similarly, when income falls, individuals are more likely to decrease their consumption of normal goods and may increase their consumption of inferior goods, those goods for which demand increases as income decreases.
Steak, in this case, can be considered a normal good for Jasper—he shifts his preference towards it as his purchasing power increases. Chicken might be considered as an inferior good because his demand for it decreases as his income grows. The concept of normal and inferior goods is a fundamental aspect of the demand theory in microeconomics, and helps in understanding how the market responds to changes in consumers' income levels.
An example of a derived demand, other than labor, could be the demand for steel that is used in the production of automobiles. The demand for steel is derived from the demand for cars, since cars are manufactured using steel. Thus, an increase in car sales would likely result in increased demand for steel.