1.2.2 - Demand

Question 1

What is meant by the term demand?

Answer 1

Demand is the quantity that customers are willing and able to but at a given price in a given period of time.

Question 2

What is the basic law of demand?

Answer 2

The Basic Law of Demand is the idea that demand varies inversely with price. Lower
prices make products more affordable for consumers, and so demand increases.

Question 3

Draw the demand curve.

Question 4

What are complimentary goods?

Answer 4

Complementary foods are goods which are bought and used together (e.g., toothbrush and toothpaste)

Question 5

What are substitute goods?

Answer 5

Substitute goods are two alternative goods that can be used to the same purpose and are therefore goods that are in competitive demand.

Question 6

What can lead to a change in demand?

Answer 6

1. Changes in the prices of substitute and complementary goods.
2. Changes in customer incomes.
3. Fashions, tastes and preferences.
4. Advertising and branding.
5. Demographics.
6. External shocks.
7. Seasonality.

Question 7

How can change in customer incomes leads to a change in demand?

Answer 7

As income rise, demand should typically rise.

However, for inferior goods demand may fall as consumers choose better alternatives that are now more affordable.

The extent of the change depends on the income elasticity of demand.

Question 8

How can fashions, tastes and preferences lead to a change in demand?

Answer 8

Demands for products that are fashionable, or trendy will experience sharp fluctuations in the quantity demanded.

Question 9

How can advertising and branding lead to a change in demand?

Answer 9

A key purpose of advertising and branding is to stimulate demand.

Example: advertising can lead to an increase in awareness of a product or service, which can then lead to an increase in the quantity demanded.

Question 10

How can demographics lead to a change in demand?

Answer 10

Demographics is concerned with the size and compositions of a population.

Demographics can have a significant impact on the demand for cortina products and services.

Question 11

How can external shocks lead to a change in demand?

Answer 11

A sudden and often significant change in the extern,a environments such as terrorism and major health scares can impacts the demand for certain products and services.

Question 12

How can seasonality lead to a change in demand?

Answer 12

For most products there i’ll be seasonal peaks and troughs in products and or sales.

Example: demand for plants at garden centres is linked to the planting season.