Demand

Question 1

What is demand

Answer 1

Demand is the number of people who are likely to buy a certain good or service, seeking to satisfy their needs and wants

Question 2

What does the law of demand state

Answer 2

There is an inverse relationship between price and quantity demanded

Question 3

What affects the demand of a good or service for a consumer

Answer 3

1. Substitution effect - changes in price motivate consumers to buy relatively cheaper substitute goods
2. Income effect - changes in price affect the purchasing power of consumers’ income
3. Law of diminishing marginal utility - as you continue to consume product, you will eventually get less additional satisfaction from each unit you consume

Question 4

What are the five shifters of demand

Answer 4

1. Tastes/preferences
2. Number of consumers
3. Price of related goods
4. Income
5. Expectations

Question 5

normal goods

Answer 5

Income and demand for product are directly related

Question 6

Inferior goods

Answer 6

Income and demand for product are inversely related

Question 7

What happens to the demand for a product when the price increases

Answer 7

Demand stays the same but the quantity demanded increases

Question 8

What causes movement along a curve

Answer 8

Changes in price affect the quantity demanded and the quantity supplied

Question 9

What causes an entire curve to move

Answer 9

The five shifters