Demand

Question 1

What does demand mean?

Answer 1

The amount buyers are willing and able to purchase at any given price.

Question 2

What is the law of demand?

Answer 2

The law of demand states that, when the price of a product falls, the quantity demanded increases, and when the price rises, the quantity demanded decreases.

Question 3

What factors cause a change in demand (non-price factors)?

Answer 3

Price of substitutes

Price of complementary goods

Changes in consumer incomes

Fashions, tastes, and preferences

Advertising and branding

Demographics

External shocks

Seasonality

Question 4

What is the difference between movement along the demand curve and a shift in the demand curve?

Answer 4

Movement along → caused by a change in price.

Shift of the curve → caused by non-price factors (e.g. incomes, tastes, substitutes).

Question 5

How do changes in the price of complementary goods affect demand?

Answer 5

If the price of a complement rises, demand for the product falls (and vice versa).

Question 6

How do changes in consumer income affect demand?

Answer 6

Higher incomes increase demand for normal goods but decrease demand for inferior goods.

Question 7

How do fashions, tastes, and preferences affect demand?

Answer 7

Positive changes in trends increase demand, while negative changes reduce it.

Question 8

How does advertising and branding affect demand?

Answer 8

Strong branding and effective advertising increase consumer awareness and loyalty, boosting demand.

Question 9

How do demographics affect demand?

Answer 9

Changes in population size, age, and structure influence demand for certain products.

Question 10

How do external shocks affect demand?

Answer 10

Unexpected events (e.g. natural disasters, political crises, covid) can reduce or increase demand suddenly.

Question 11

How does seasonality affect demand?

Answer 11

Demand for some products rises or falls depending on the time of year (e.g. ice cream in summer, toys at Christmas).