Obj 3.3

Question 1

What is demand?

Answer 1

Demand is the quantity of g/s that consumers will be prepared to buy at a particular price. It is the willingness and desire to buy a product backed by the ability to pay for the g/s

Question 2

What is demand derived from?

Answer 2

Demand is derived from the law of diminishing marginal utility

Question 3

What is the law of diminishing marginal utility?

Answer 3

Consumers use the first units of an economic good they purchase to serve their most urgent needs first and use each additional unit of the good to serve successively lower valued ends

Question 4

What does the law of demand help us understand?

Answer 4

why things are priced at the level that they are and to identify opportunities to buy what are perceived to be underpriced (or sell overpriced)

Question 5

What does the first law of demand state?

Answer 5

That as price of a g/s is lowered, consumer demand increases

Question 6

In the first law of demand what is the relationship between the price of a good and the quantity demanded

Answer 6

There is an inverse/negative relationship between the price of a good and the quantity demanded

Question 7

As price increases…

Answer 7

less of a good is demanded

Question 8

As price falls…

Answer 8

more of the good is bought

Question 9

What shape is the demand curve and why?

Answer 9

The demand curve is always downward sloping due to the law of diminishing marginal utility

Question 10

What does the law of diminishing marginal utility state (2)

Answer 10

It states that, ceteris paribus as consumption increases, the marginal utility (satisfaction/happiness) derived from each additional unit declines

Question 11

What does the law of diminishing marginal utility state (2)

Answer 11

It states that, ceteris paribus as consumption increases, the marginal utility (satisfaction/happiness) derived from each additional unit declines

Question 12

Review the diagram showing the demand curve

Answer 12

Fig. 1.1

Question 13

What is ceteris paribus used to analyze?

Answer 13

Other things remaining constant (ceteris paribus) is used to analyze the impact of one factor at a time

Question 14

What is effective demand?

Answer 14

Can be defined as the desire/willingness of a consumer to purchase a g/s backed by the ability to purchase it

Question 15

What is individual demand?

Answer 15

Individual demand is the demand by one consumer for a g/s

Question 16

Read Abe’s individual demand schedule

Answer 16

pls pls pls

Question 17

What is the individual demand curve?

Answer 17

A graphical representation of the quantities demanded of a good by a consumer at each price

Question 18

What is the market demand schedule

Answer 18

The horizontal summation of the demand of all buyers in the market at each price

Question 19

What causes a change in demand

Answer 19

Caused by change in non-price factors. It is graphically shown by shifts of the demand curve. These shifts can be rightward or leftward indicating an increase or decrease in demand respectively

Question 20

What causes a change in quantity demanded

Answer 20

Occurs due to a change in the price of a good or service only. It is graphically represented by movements along the demand curve. This can either be a contraction or extension of the demand curve