Unit 1.21

Question 1

1a) What is demand?
1b) What is effective demand?

Answer 1

1a) the number of goods and services customers are willing to buy at a given price
1b) when customers are willing and able to buy at the businesses given price

Question 2

What is the relationship between quantity demanded and price?

Answer 2

there is an inverse relationship:
-as price increases the quantity demanded decreases
-as the price decreases the quantity demanded increases

Question 3

1a) What direction does the demand curve go
1b) and why?

Answer 3

1a) a downward slope from left to right
1b) to show the inverse relationship between quantity demanded and price

Question 4

1a) what does a change in price lead to?
1b) and what does every other change lead to?

Answer 4

1a) a movement along the demand curve
1b) a shift in the demand curve left or right

Question 5

What are the non price factors affecting demand?

Answer 5

1) External shocks
2) Seasonality
3) Changing demographics
4) Changes to income
5) Advertising and
6) Branding
7) Changes in fashion and taste
8) Price of other goods

Question 6

1a) What are complimentary goods
1b) And what is an example of how it may change demand?

Answer 6

1a) Complementary goods are goods that are consumed together

1b) Cars and petrol: If the price of petrol rises, the demand for cars may fall

This shifts the demand curve for cars to the left

Question 7

1a) What are substitutes
1b) And what is am example of how it may affect demand

Answer 7

1a) Substitute goods are replacement goods (e.g. different car brands)

1b) f the price of VW cars increases, demand for Ford cars might rise

This shifts the demand curve for Ford cars to the right

Question 8

How do consumer incomes affect demand?

Answer 8

-As a consumer’s income rises, demand for normal goods increases

-As a consumer’s income falls, demand for inferior goods increases

Question 9

How do fashion and taste affect demand?

Answer 9

-If products become more fashionable, demand for them increases

Question 10

1a) How does demographics affect demand?
1b) And what is an example of this?

Answer 10

1a) If the structure or size of a country’s population changes, then the demand for products will also change

1b) A decrease in the number of babies being born will reduce the demand for baby products

This shifts the demand curve for baby products to the left

Question 11

1a) How do advertising and branding affect demand?

1b) and what is an example of this?

Answer 11

1a) If more money is spent on advertising and branding, then this increases consumer awareness and brand loyalty

1b) Coca-Cola spends an average of $4bn per year on advertising and branding

This shifts Coca-Cola’s demand curve to the right and makes demand more price inelastic

Question 12

1a) What are external shocks
1b) and what is an example of them affecting demand?

Answer 12

1a) An unexpected event can change the demand

1b) The outbreak of Covid-19 led to panic buying of goods such as toilet rolls

This shifted the demand curve for toilet rolls to the right